Benchmark crude oil futures fell slightly yesterday, but still hovered near their record overnight closing price, as traders worried about future oil production from Saudi Arabia after the death of King Fahd.
More threats from Iran to resume its nuclear processing and refinery fires in the US also supported prices.
Midafternoon in Singapore, light, sweet crude on the New York Mercantile Exchange was down US$0.16 to US$61.41 a barrel for the front-month September contracts. It had risen US$1 to close at US$61.57 following news of Fahd's passing and spiked to an all-time intra-day record of US$62.30 a barrel in New York floor trading.
Both were new highs for crude on the Nymex since oil began trading on the exchange in 1983, but prices would have to surpass US$90 to reach the all-time inflated-adjusted high in 1980.
Brent futures for next month on London's International Petroleum Exchange opened US$0.01 up from Monday's US$60.44 a barrel close, then slipped to US$60.35 a barrel.
Saudi Arabia is the world's largest exporter of crude and sits on a quarter of the world's oil reserves.
While oil policy is not expected to change, with oil consumption rising around the world and only a limited amount of excess production capacity available, energy traders are easily put on edge by any geopolitical change, perceived uncertainty or weather patterns in producing regions.
"The question is who will follow them as next in line to become absolute monarch of the world's biggest oil producer," said Energyintel analyst Jane Collin, referring to Abdullah and Sultan. As in neighboring Kuwait, where both the ruler and his heir are in their late 70s, there is no established system for handing over to a younger generation.
"The potential for bitter infighting is already triggering concern about future stability in the oil-rich region," she said.
Traders also are nervous about Iran's plans to resume uranium reprocessing, which is firmly opposed by Washington. Tensions between the world's largest energy consumer and Iran, the No.2 producer within the OPEC cartel, worry oil markets because Tehran has the ability to cripple markets by shutting off its taps. Iran produces about 4 million barrels daily.
Fires last week at a Murphy Oil Corp 120,000 barrel-a-day Meraux refinery in Louisiana and a BP PLC 437,000 barrel-a-day plant in Texas City were the catalyst for prices to move above US$60.
Such shutdowns play into fears that refiners may not be able to catch up with demand, especially during the fourth quarter of the year.
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