LONDON – Oil prices hit fresh records again on Monday, pushing London Brent crude above $50 for the first time and extending a relentless rise that has added around 65 percent to the cost of crude this year.
Brent on London's International Petroleum Exchange (search), the benchmark for European imports of Middle Eastern, Russian and African crude hit $50.62 a barrel, up 91 cents on the day and $20 higher than at the start of the year.
U.S. light crude hit a new high of $53.69 a barrel and by 1:20 p.m. EDT was trading at $53.55, up 24 cents on the session.
China has led rapid growth in world oil demand this year, eroding spare production capacity in OPEC (search) nations and leaving the global market a tiny supply margin to cope with disruptions.
Saudi Oil Minister Ali al-Naimi said at the weekend that price levels were unjustified and should come down after November's U.S. presidential elections.
"There is no justification for it to be where it is. This is a political year and this may have some influence," he said during an oil conference in Abu Dhabi.
Naimi reiterated that top world exporter Saudi Arabia could pump an extra 1.5 million barrels per day if required. Oil traders say that extra supplies of the kingdom's high-sulphur crude can do little to help.
Industrialized nations lack high-tech refinery capacity to process OPEC's low-quality crude into transportation and heating fuels. This has forced refiners to bid up prices for higher quality supply from Africa and the North Sea.
"As winter approaches, fears of insufficient supplies to meet heating demand are driving a strong push for sweet, distillate-rich crudes in the hope of building a sufficient stock cushion," PFC Energy said in a report.
European distillate stocks are 3.4 percent below last year ahead of peak winter heating demand, Euroilstock industry data showed on Monday.
The lingering impact of Hurricane Ivan (search), which hit offshore U.S. oil producers nearly four weeks ago has further tightened supply. About 475,000 barrels per day of U.S. Gulf of Mexico oil production remains out of commission.
A third of that is expected to be resumed by the end of this month, the U.S. Minerals Management Service said on Friday. But operators say some output may be out until next year.
Nigeria also remained a worry after repeated threats to its production. Unions began a four-day general strike over fuel prices on Monday, although oil executives said there should not be an immediate impact on output, which accounts for about 3 percent of the world's oil.
In Norway Norwegian oil rig workers on Tuesday plan to cut an additional 25,000 barrels of oil per day as they broaden a three-month strike. The strike has hit a total of 55,000 bpd of Norway's three million bpd output.
Oil importers have so far taken rising energy costs in their stride but signs are growing of increasingly unease about the economic impact.
"(Oil) is creating headwinds for the otherwise very strong economy," U.S. Treasury Secretary John Snow said at the weekend.
European Monetary Affairs Commissioner Joaquin Almunia said oil was the most prominent worry in the world economy. "The focus has now shifted toward the likely impact of high oil prices on global growth and inflation," he said.