Oil prices were higher on Tuesday, with benchmark US crude trading above $42 a barrel for the first time since June 2, supported by concerns robust world demand is stretching supplies to the limit.
The August contract of US light crude, due to go off the board at the end of Tuesday's trade, was up 36 cents at $42.00 a barrel, mostly on position adjustment buying ahead of its expiry, traders said.
August crude traded as high as $42.30, just below its 21-year peak of $42.45 hit on June 2, which was the highest price since crude futures were launched on the New York Mercantile Exchange in 1983.
In London, benchmark Brent futures was up just two cents to $37.92.
"There's not much open positions left on August crude and not much resistance on the upside ... trading focus is shifting to the September contract," a NYMEX floor trader said.
There was caution in the market ahead of the latest US weekly supply data on Wednesday, and comments to the Senate on the health of the US economic recovery from Federal Reserve Chairman Alan Greenspan later on Tuesday, traders said.
He is expected to say that the US economic recovery is solid and to blame a slowdown in June on a summer lull.
Oil stocks in the United States, the world's leading consumer, have been building, but traders are concerned that supplies, especially of refined products are inadequate.
Analysts expect Wednesday's data to show crude inventories rose last week, but gasoline stocks fell in response to heavy demand.
"There is a genuine worry if there's enough capacity to supply both crude oil and oil products," said Nigel Saperia, an oil trader at Glencore.
In its first forecast for 2005, the Organisation of the Petroleum Exporting Countries on Monday said it saw demand for its crude up 340,000 barrels per day (bpd) to an average 27.36 million bpd, from 27.02 million bpd in 2004, and following an increase of 590,000 bpd this year.
World oil demand in 2005 is projected to climb by 1.66 million bpd to 82.56 million bpd, up two percent, after unusually sharp growth of 2.1 million bpd, 2.7 percent this year, the Opec report said.
Economic growth in key leading oil consumer the United States and also China, which has overtaken Japan as the world's second largest oil consumer, has shown signs of slowing, potentially reducing oil demand.
In an attempt to calm prices, Opec has implemented a series of production increases and has said it is adding a further 500,000 bpd from August.
Analysts say the change to the formal production ceiling effectively makes little difference because the cartel is already pumping well in excess of official quotas.
Opec's latest estimate for its own output was 28.92 million bpd for June, compared with its new formal ceiling of 26 million bpd from August 1.
A Gulf industry source said on Tuesday that leading oil exporter Saudi Arabia might boost production close to 9.5 million bpd) in August, a 400,000 bpd rise on this month.
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