NEW YORK - Oil prices flirted with 68 dollars a barrel Thursday because of fears of a supply crunch linked to falling US gasoline supplies and tensions in Nigeria and Iran, dealers said.
New York's main contract, light sweet crude for delivery in May, reached as high as 68.20 dollars a barrel during the session before closing at 67.94 dollars, up 87 cents from Wednesday.
In London, the price of Brent North Sea crude for May delivery hit an intra-day peak of 68.24 before settling 74 cents higher at 67.84 dollars a barrel.
That was not far off the record high in London of 68.89 dollars a barrel reached on August 30, after Hurricane Katrina devastated energy facilities on the southern US coast. New York prices went as high as 70.85 dollars.
Fimat analyst John Kilduff said investors were growing more edgy as the start of the US summer driving season approaches in late May.
"The failure to rebuild (US) gasoline stocks in the month of April could result in drastic regional supply shortages in the coming months, and that concern is certainly being expressed in rising prices," he said.
"The 70.85 dollar high of last August 30 seemed like an anomaly after last year's storms," Kilduff added.
"Now the confluence of events that constitutes the wall of worries that the market is climbing will shortly make that price a natural progression."
Prices were extending gains witnessed on Wednesday after the Department of Energy revealed that US stockpiles of gasoline (petrol) dived by 4.4 million barrels to 211.8 million barrels in the week to March 31.
The fall was far more than the 1.4 million barrels expected by analysts.
The DoE also said that crude oil reserves increased by 2.1 million barrels to total 342.8 million barrels last week. Analysts had predicted a rise of about half that.
US crude stockpiles are up nearly eight percent from a year ago and now stand at their highest level since April 1999. But the oil market is taking its cue from the fear of summer shortages of gasoline.
Several US refineries are struggling to get back to full operations after last summer's hurricanes, while gasoline supplies are also being affected by new federal regulations banning the additive MTBE in favour of ethanol.
"Fears are escalating that if at this rate refineries don't get back online quickly, then gasoline supplies which are currently above normal will fall to below normal," Alaron Trading analyst Phil Flynn said.
"With extended maintenance and the uncertain future with ethanol, the gas(oline) market once again will be extremely volatile and oil potentially explosive," he said.
Oil traders were also nervous over potential developments in major crude exporters Nigeria, the scene of repeated militant attacks on oil installations, and Iran.
"Concerns remain about Nigerian and Iran, especially after the latter's recent show of military strength in the Gulf," Sucden analysts said.
Iran, the world's fourth-biggest producer of crude, has this week been showing off its military achievements in the Gulf, including radar-evading anti-ship missiles.
Analysts fear that Tehran could use those missiles to cripple maritime traffic and block the Straits of Hormuz, between the Gulf and the Sea of Oman, if threatened over its nuclear ambitions.
Iran is under mounting world pressure to give up its nuclear programme, which it claims is purely for energy purposes but which many countries suspect is cover for a weapons plan.
04/06/2006 20:23 GMT