Crude oil prices rose again yesterday as concern continued about disruptions to world production.
The price of benchmark crude oil for September delivery closed at $43.80 a barrel on the New York Mercantile Exchange, up $1.05 from Thursday. It was the highest closing price in the 21 years the exchange has sold the contracts, surpassing Wednesday's record high of $42.90.
Prices of crude oil and gasoline have been flirting with record levels for months. Adjusted for inflation, however, the cost of oil remains well below peak prices in the late 1970s and early 1980s.
Analysts said the price increase yesterday was not driven by new developments in oil-producing countries. Instead, they cited continuing fears over production disruptions in Russia, global terrorism and instability in oil-producing countries.
Because world production is near capacity while consumption has increased, the market is reacting to concerns that a disruption in production could have significant consequences, analysts said.
Tom Kloza, chief oil analyst at Oil Price Information Service in Lakewood, N.J., said investors believe that prices will rise further and are reluctant to sell oil contracts, holding out for higher prices. "There is a clear belief that these prices are going to go higher," he said.
"If a terrorist blows up some offloading or production facilities in Saudi Arabia you don't want to be short, " said Scott Hess, a heating oil trader for G and H Commodities.
Traders also are concerned about a dispute between the Russian government and its largest oil company, Yukos, which produces about 1.7 million barrels a day or about 2 percent of the world's crude. Russian officials say the company owes back taxes, but said they do not intend to stop production, only to freeze asset sales by the company's subsidiaries. Still, a top Yukos official has said that unless bank accounts are unfrozen, production could be disrupted.
Regular grade gasoline prices at stations in the Washington area averaged $1.91 yesterday, according to a daily survey commissioned by AAA. Analysts said the latest increases in crude oil prices would result in higher retail prices for gasoline within several weeks.
Sarah Emerson, managing director of Energy Security Analysis in Boston, said the rising prices are not a result of supply and demand.
"If anything the fundamentals are saying this is a market that should be going down," Emerson said.
Oil companies have been announcing significant increases in profits this week as prices continue to rise. Yesterday, ChevronTexaco Corp. reported a profit of $4.1 billion for the quarter, up from $1.6 billion for the same period last year.