Oil faded from its $67 (€54) high yesterday but the United States' refusal to rule out force against Iran, Opec's second-biggest producer, kept prices bubbling.
Doubts that the oil industry can pump and refine enough crude have catapulted prices nearly 40 per cent higher this year.
The rally showed no real sign of letting up yesterday, even as a top economist at the International Energy Agency (IEA) warned that red-hot prices would crimp world economic growth this year.
Analysts at PFC Energy said some were looking for oil to breach $70 a barrel. Adjusted for inflation that would bring it within sight of the $82 average in 1980, the year after the Iranian revolution.
"As long as the prospect of sanctioning four million barrels per day of Iranian oil is out there, the Iranian situation, in our view, will be the front and centre issue that will command market attention," said Edward Meir of Man Energy.
Iran's determination to press on with its nuclear programme in defiance of the West has put the world's fourth biggest crude producer at risk of punitive United Nations sanctions.
It also drew strong words at the weekend from US President George Bush, who said he would consider using force against Iran as a last resort.
US light crude was trading at $66.40 a barrel yesterday afternoon, down 46 cents having surged more than $1 on Friday to touch a record $67.10.
London Brent crude was down 15 cents at $66.30 after hitting a record high of $66.85 yesterday.
Record high oil prices will cut world economic growth and widen current account gaps in rich and emerging economies, the IEA's chief economist said in Istanbul yesterday. "If this year's average oil price hits $50, then this will slash 0.8 per cent of the world economic growth," Fatih Birol said in an interview.
US crude so far this year has averaged around $53 a barrel. Analysts said the oil price could well climb further.
"Crossing $60 triggered an influx of fund money and this money is all looking for prices to go higher still," PFC Energy said in a report.
Geoff Pyne, energy consultant for Standard Bank, said much of the recent rise was caused by fear and speculation, but added: "It is quite right to say the security of supply is not the same as it was four to five years ago." -
Oil faded from its $67 (€54) high yesterday but the United States' refusal to rule out force against Iran, Opec's second-biggest producer, kept prices bubbling.
