Oil blipped above $64 a barrel to another record high on Tuesday as traders factored in the potential for Middle East supply disruptions that could add strain to a market already struggling with refinery glitches.
In Saudi Arabia, the world's top exporter, US missions remained shut for a second day and Britain said militants were in the "final stages" of planning attacks, while the UN nuclear watchdog prepared to discuss Iran's resumption of nuclear work.
US light sweet crude soared past on Monday's record high in electronic trade on Tuesday, hitting a new peak of $64.27 a barrel, 48 percent higher than the start of the year.
It was trading up 11 cents at $64.05 a barrel, while London Brent crude was up 10 cents at $62.80. "The key issue now is the geopolitical risk," said Dariusz Kowalczyk, senior investment strategist at CFC Securities Ltd in Hong Kong.
"Because spare capacity is so low, any threat to supply makes the market very nervous, either on the crude side or refined products side," he added.
After rallying since late-July on a series of US refinery outages that threaten to tighten fuel supplies, prices soared this week as Middle East security fears come back to the fore.
Britain on Monday cited "credible reports" of an attack in Saudi Arabia, which is battling a two-year campaign of violence by supporters of al Qaeda leader Osama bin Laden, who in the past has urged attacks against well-protected Gulf oil infrastructure.
The US warning also extended to suborn vessels travelling in the southern Red Sea.
Iran, Opec's second biggest member, was also a focus of concern after Tehran resumed work at a uranium conversion plant on Monday, defying EU warnings that it could be referred to the UN Security Council for possible sanctions.
"The risk of such a scenario has increased substantially and that had to be priced in," said Kowalczyk.
The governors of the UN International Atomic Energy Agency (IAEA) will hold an emergency meeting on Tuesday, but diplomats said it was not likely to call for a UN referral just yet, giving the EU and Iran time for more talks.
Iran's resumption of work at the plant comes days after the inauguration of new conservative president Mahmoud Ahmadinejad. Oil traders' worry he could take a hard line on the nuclear programme, which the West fears, is meant to develop atomic weapons.
Speculative fears about Middle East flows were complemented by fundamental factors in the United States, where more refinery glitches heightened doubts about whether summer fuel supplies would comfortably last the rest of the driving season.
Nearly a dozen refiners have been forced to close down units unexpectedly in the past few weeks as a summer of near full-throttle operations begins to take its toll.
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