Oil hit a record above $84 a barrel today on mounting tensions between Turkey and northern Iraq and lingering supply concerns ahead of the Northern Hemisphere winter. US crude settled up 61 cents at $83.69 a barrel, after trading up to a record $84.05 a barrel earlier.
London Brent crude climbed 40 cents to $80.55 a barrel. Though oil prices have quadrupled since 2002, when adjusted for inflation the price is still below the $90-a-barrel peaks at the time of the Iranian revolution in 1979.
Prices jumped after the Kurdistan Workers Party said it would move back into Turkey from northern Iraq and target the Turkish government, highlighting tensions in a region that pumps a third of the world's oil.
Iraq's oil exports through Turkey have been virtually idle since the US-led invasion of Iraq in March 2003 due to sabotage attacks, and most of Iraq's oil is exported from the country's south.
The rising tensions added to worries of a supply crunch during the Northern Hemisphere winter after declines in US and European fuel inventories.
The latest snapshot of oil supplies in top consumer the United States showed a 1.7 million barrel fall in crude oil stocks last week to the lowest level since January. European oil stocks have also slimmed.
"I do think fundamentals are supportive of where the price is," said Tony Dolphin, director of economics and strategy at Henderson Global Investors. "Demand continues to be boosted by the strength of the emerging economies. And not just China."
US Energy Secretary Sam Bodman said the U.S. economy has proved "remarkably resilient" to strong oil prices and that markets may not need a second hike in crude output from Opec.
The Organization of Petroleum Exporting Countries agreed in September to boost crude supplies by 500,000 barrels per day starting in November. But many analysts have called the move insufficient to avert a squeeze this winter when cold boosts heating oil demand.