Oil prices surged to a new high of nearly $64 a barrel yesterday as the market reacted to persistent strong demand, refinery problems and threats of terrorism abroad.
Traders said they were particularly concerned about reports that terrorists were planning attacks in Saudi Arabia, the world's largest oil-producing country. In the United States, fires and other difficulties at refineries have cut production, raising concerns about fuel supplies and contributing to the jump in prices, traders said.
Meanwhile, the thirst for oil -- particularly from China and India -- has grown even as prices have risen.
"The real question is: Where do we reach demand destruction?" said Michael Guido, director of commodity strategy in New York for Societe Generale. "At this rate and at this pace, we can keep going higher."
Suppliers are struggling to meet the rising demand. The world has little ability to pump much more oil than already is coming out of the ground, leading to concerns that significant supply disruptions could cause shortages. Traders are particularly nervous about projections that demand will grow later this year.
U.S. benchmark crude oil for September delivery on the New York Mercantile Exchange closed at $63.94, up $1.63 from Friday. While oil closed at a record high, it remains below its inflation-adjusted peak, set in 1981.
Rising oil prices are pushing up the price of gasoline at the pump. Nationally, the price of a gallon of regular reached a record of $2.339 yesterday, up more than three cents from the day before, according to a AAA auto club survey.
In Saudi Arabia, Britain warned of credible reports that militants were planning attacks in the near future. The United States closed its embassy and consulates, citing threats to U.S. government buildings.
"The potential for oil targets to be struck in Saudi Arabia always gives the markets pause," said John P. Kilduff, senior vice president for energy risk management at Fimat USA Inc. in New York. He said he expected the market to "make a run toward $70" a barrel.
Also contributing to fears about international oil supplies were reports yesterday that separatist rebels in India blew up a critical oil pipeline there.
Domestically, the refinery industry has been hit recently by a series of mishaps. A weekend fire struck a Sunoco Inc. plant in Philadelphia. Problems at a Valero Energy Corp. refinery in Oklahoma are expected to curtail fuel production, officials said. Analysts said that refineries were running around the clock and with high summer temperatures were more prone to fires and other malfunctions.
In addition, traders said that prices had crossed points that trigger automatic buying -- particularly on the part of hedge funds -- pushing prices higher still.
"It's momentum trading," said Mario Chavez, vice president of global energy futures at ABN-Amro in New York. "You're seeing the momentum take this higher."