SINGAPORE (AP) - Crude oil topped US$50 per barrel during Asian trading on Tuesday - pushing past the psychological milestone for the first time then surging further to new record levels likely to unsettle consuming nations.
Traders bid oil to new highs in after-hours trading on the New York Mercantile Exchange in a reaction to the slow recovery of U.S. oil production that was damaged by Hurricane Ivan and unrest in key producers Saudi Arabia, Iraq and Nigeria.
After reaching US$50, prices inched higher. By mid-afternoon in Asia, light sweet crude oil for delivery in November traded at US$50.47 per barrel, up 83 cents from the close of Monday's regular session in New York.
Oil spiked despite assurances from OPEC's president that producing nations were seeking ways to calm markets after an announcement that the cartel would boost production by 1 million barrels a day failed to move the price lower.
"The latest spark was the reported increase in fighting in Nigeria,'' said ANZ Bank energy analyst Daniel Hynes from Melbourne, Australia.
"But Ivan certainly paved the way for the latest surge.''
Rebels in Nigeria continue to battle for control over the vast southern oil fields in the world's seventh-largest exporter.
The United States has lost more than 11 million barrels of oil production in the past two weeks, according to U.S. government data, with Gulf of Mexico output still down nearly 500,000 barrels a day following the devastation brought by Ivan.
The price of oil is up roughly 75 percent from a year ago and some analysts predict the latest surge - which is already hurting airlines and other big consumers - could lead to a global recession.
Although oil is at an all-time high, prices are not at record levels when inflation is taken into account. Adjusting for inflation, today's prices are still more than $30 below the level reached in 1981 after the Iranian revolution.
That hasn't eased the fears gripping the market, however.
"There is a lot of fundamental, panic buying by the end users,'' said oil strategist Ng Weng Hoong at Energyasia.com in Singapore, adding that he believed the price would go still higher.
"When they cracked US$50, now there is a trigger for US$60. It broke the barrier, it's going to reach the next target,'' he said.
With global oil demand at roughly 82 million barrels a day, analysts say the amount of excess oil production available is only about 1 percent, leaving the industry a slim margin for error in the event of a prolonged supply interruption.
Purnomo Yusgiantoro of the Organization of Petroleum Exporting Countries said Tuesday that producers are trying to bring prices down, but the group thinks supply is not the problem because it has at least 1.5 million barrels a day of spare capacity.
"Can we really trust any of these guys?'' asked Ng.
"If I repeatedly get bad news from you, I am just going to keep on buying,'' he said, adding there has been no fresh signs that key producers have additional oil to cope with rising global demand.
"There are 10 to 12 structural factors driving the market, the latest factor is panic and fear,'' added Ng.
On Monday, the U.S. Minerals Management Service reported that daily oil production in the Gulf of Mexico is 29 percent below normal at about 1.2 million barrels per day.
Eleven million barrels of oil, or 1.9 percent of annual production in the Gulf of Mexico, have been lost since Sept. 13, when offshore producers began evacuating crews and shutting down production ahead of Ivan's arrival.
In Iraq, fighting between U.S.-led forces and rebels has shown no sign of letting up ahead of the country's elections in January.
Also Tuesday, heating oil futures breached US$1.38 per gallon, reflecting supply concerns ahead of the Northern Hemisphere winter.
"There are already signs of a cold, cold (Northern Hemisphere) winter so that's going to add to more fears. The stockpiling is just going to increase,'' Ng said. - AP