Oil prices rose to another record high on Tuesday on US economic data showing inflationary pressure was held in check in July and ahead of weekly inventory data on Wednesday expected to show a decline in crude stocks.
US light crude oil for September rose as much as 93 cents to $46.95 a barrel, another record in the 21-year history of the New York Mercantile Exchange contract, before settling at $46.75 at the close. US prices had set all-time highs in all but one of the previous 12 trading sessions.
In London, North Sea Brent rose 30 cents to close at $42.99 a barrel.
Prices rose after the US government reported consumer prices dropped in July for the first time in eight months in a report showing underlying inflation pressures largely in check.
"The latest consumer price data implied demand will continue to be strong because it appears that higher energy prices has had little impact on overall inflation," said Phil Flynn, an analyst at Alaron Trading in Chicago.
"It looks like the concerns that high oil prices will drive inflation higher were overblown," Flynn added.
In real terms, adjusted for inflation, current oil prices are still well below 1980's peak of $80 a barrel, following the Iranian revolution. But average US prices this year of $38 are approaching those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
Traders were also awaiting the US Energy Information Administration's inventory data for the week ended August 13, due to be published on Wednesday.
A Reuters survey of eight analysts forecast a fall of 1 million barrels in commercial US crude stocks. In the previous week crude stocks fell 1.9 million barrels to 298.6 million.
US oil demand so far this year is running at a strong growth rate of 3.5 percent, despite high prices.
Oil's higher closing price reversed early falls spurred by a convincing referendum victory in Venezuela for President Hugo Chavez and after Russia's YUKOS oil company said it had received a government assurance on September exports.
Continued disruption in Iraqi supplies and strong world fuel demand underpinned prices, which remain $9 a barrel, or 25 percent, higher than at the end of June.
Opec power Saudi Arabia said on Monday it was pumping as much as possible to bring prices down to $25-$30 a barrel. Extra Saudi crude should help increase oil inventories ahead of the peak winter demand season.
On Tuesday Venezuela's Opec governor, Ivan Orellana, reiterated to reporters in Vienna that his country will propose at Opec's meeting in September that the cartel's preferred price band be raised to $28-$35 from $22-$28 to better reflect market conditions.