NEW YORK (AFP) - New York`s main crude oil contract closed above 51 dollars a barrel for the first time, riding a speculative wave powered by fear of interruptions to supply from the Gulf of Mexico.
Light sweet crude for delivery in November shot up 1.18 dollars to settle at 51.09 dollars.
The contract earlier spiked to a record 51.29 dollars.
"It took the market a while to recognize how serious the situation in the Gulf of Mexico is," said PFC Energy analyst Seth Kleinman.
Oil traders were concerned by a US government agency report that 26.65 percent of the Gulf of Mexico`s 1.7 million barrels of daily oil production remained disrupted because of the hurricane season.
The Department of Interior estimated 453,092 barrels per day were missing from daily production. More than 15 million barrels had been lost in the past three and a half weeks, it said.
But Oppenheimer market analyst Fadel Gheit blamed speculators for creating an oil market bubble unrelated to reality.
"It is speculation, pure speculation. It has nothing to do with the fundamentals," he said.
"Every broker`s firm has large commodity trading operations. They want to extend the current rally as much as they can. It is a bubble like the Internet bubble. It is not justified by supply or demand," he said.
In fact, global supply had increased in the past year by at least five million barrels a day, Gheit said.
"But nobody is talking about it."
In the past year, Iraq had increased output by more than 2.5 barrels a day, Russia almost a million barrels and the Organization of Petroleum Exporting Countries (OPEC) at least another 2.5 million," he said.
"And yet we are still complaining of a perception of potential supply shortages," Gheit said.
The shortages in supply from the Gulf of Mexico were the only physical interruptions to oil production experienced so far, he said.
Market fears over disruptions to supply from Iraq, Saudi Arabia, Nigeria, Venezuela, Norway and Russia had proven largely unfounded, Gheit said. "But when nothing materialized, prices never came down."
US Treasury Secretary John Snow blamed speculators for driving up prices after holding talks with Group of Seven partners here Friday.
"What we see is that anything that raises questions, that poses uncertainties seems to get an amplified reaction in the market place," the treasury secretary told a news conference.
"I think that spot prices are out of line with the basic fundamentals and that there will be a regression, a movement, back towards the fundamentals," he said.