Oil surged to a record $68 a barrel before easing on Thursday, hounded by supply concerns due to a growing threat to oil facilities from an Atlantic storm and a large fall in US gasoline stocks.
US light crude rose 21 cents to $67.53 a barrel in Asia trade, pausing after hitting $68.00 in trade, the highest since US crude futures started trade in 1983. London Brent crude was up 55 cents to $66.56.
Dealers are concerned about a thin stock cushion after a rash of disruptions and tensions in oil-producing countries cut crude output and propelled prices to a series of record peaks.
Gasoline stockpiles in the United States, the world's top oil consumer, beat forecast to register a slide of 3.2 million barrels in the week to August 19, widening the supply gap from a year ago, the government Energy Administration Agency said.
Stocks of the auto fuel have contracted for eight-straight weeks, led by higher demand as the peak driving season has two weeks to run its course. Compounding the fears, a tropical storm is swirling towards Florida, threatening US oil and gas production facilities in the Gulf of Mexico.
"The market is really starting to get unhinged," said John Brady at ABN Amro in New York. "The majority can be attributed to the storm, and some geopolitical concerns as well."
Tropical storm Quatrain, which formed in the Bahamas on Wednesday, was moving on a path that would likely cut across southern Florida and into the Gulf of Mexico later this week, the US National Hurricane Centre said.
The storm was expected to hit the Miami area on Friday as a weak hurricane moving slowly across the state into the Gulf. "The X factor is whether we get a similar reaction to Hurricane Ivan, where the market sells off into the hurricane.
Then you get the damage reports, which could really ignite the market," said Brady.
Market participants fear the storm may threaten key oil and gas producing areas in the central and eastern Gulf of Mexico, where the United States derives between 20 and 25 percent of domestic crude and natural gas production.
The unusually active Atlantic hurricane season has produced 11th named storms and could culminate in as many as 21 tropical storms and 11 hurricanes, US government weather forecasters have said.
Refinery snags, which have remained a bane since late-July, have attracted the attention of the IMF. "There are also constraints in the consumption countries. Refinery bottlenecks are playing an important role," said International Monetary Fund's Chief Rodrigo Ratio.
"There is very strong demand and we don't see that demand receding," Ratio said in a teleconference on Thursday to preview his September visit to Asia. Adding to the list was Shell Oil Co's 153,000 barrel-per-day (bpd) refinery in Martinez, California, which suffered a malfunction in a production unit on Tuesday.
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