Oil prices scaled fresh highs Thursday, forcing Opec to consider a second output increase a day after its decision to raise supplies failed to halt crude's record-breaking advance. US light crude set a record of $57.60 a barrel on the New York Mercantile Exchange before easing to have a last trade of the day at $56.30, down 16 cents. London Brent crude, benchmark for European imports, hit an all-time high of $56.15 a barrel on the International Petroleum Exchange before ending the day at $55.06 up 18 cents.
The Organisation of the Petroleum Exporting Countries agreed Wednesday to raise output immediately by 500,000 barrels per day. The agreement allows the addition of a further 500,000 bpd, if prices do not fall.
"If prices continue as they are now during the coming 7 to 10 days, we will begin our contacts with our colleagues so we can consult on the additional 500,000," Opec President Sheikh Ahmad al-Sabah said.
With output already near a 25-year high, Opec is stretched to meet rising demand, encouraging the investment community to bet that oil's bull run can go further.
Investors are diversifying into energy and commodities, driving US crude on average to $49.16 this year, up $7.70 from 2004's average and $18 higher than the 2003 mean.
Rodrigo Rato, the head of the International Monetary Fund, said Thursday oil prices posed a risk, but that world economic growth still was expected to beat 4 percent in 2005.
"Oil demand has continued to be more income elastic than expected, and less price elastic, and for now there is no obvious dynamic in play to derail demand significantly," Paul Horsnell of Barclays Capital said.
"Clearly, at some stage, demand elasticity must start to bite but, remarkably, so far there is no such sign, despite $55 oil," said Mehdi Varzi at Dresdner Kleinwort Wasserstein.
Economists say one reason is that non-dollar economies are insulated from some of the rise in US dollar-denominated oil prices by the weak US currency.
Unrelenting demand growth from China is fuelling strength in other emerging Asian economies, while the United States, for now, is absorbing higher fuel costs.
Oil's charge to new highs came after US government data on Wednesday showed gasoline stocks off 2.9 million barrels, more than three times market expectations.
US oil demand for the four weeks ending March 11 rose to 20.72 million bpd, up 1.5 percent on the same period last year.
Cold weather fuelled year-on-year demand growth in the week to March 11 of 4.8 percent, to 21.26 million bpd.
Struggling to contain prices ahead of weak seasonal second-quarter demand, Opec ministers warned this week that prices could go even higher as demand accelerates later this year.
Global consumption is projected rising to 86.1 million bpd during the fourth quarter demand peak, up from 83.7 million bpd over the first nine months of 2005, says the Paris-based International Energy Agency.
After this week's output increase, Opec economists calculate the group has only 1 million bpd of spare capacity, with new projects likely to add 500,000 to 1 million bpd by year's end.
Opec is not getting much help from non-cartel producers.
Mexico reported exports at 1.856 million bpd for the first two months of 2005, down from 1.974 million bpd in December.
Russia said it expected second-quarter production to climb by 250,000 bpd to 9.58 million bpd, but only after a four-month decline between October and January from post-Soviet highs.
Norway said it had "very limited capacity" to boost output.