Oil climbs higher on supply worries
Crude prices resumed their advance as the head of the International Energy Agency said the world is experiencing "the third oil price shock," comparing the effects of today's prices with the oil crises that began with the 1973 Arab oil embargo and the 1979 revolution in Iran.
IEA chief Nobuo Tanaka added that OPEC is pumping oil at record levels and other producers "are working at full throttle." His comments reinforced the IEA's latest prediction that global supplies will remain pinched despite near-record prices and falling demand in the U.S. and Europe.
"Day-to-day market noise can be driven by speculators," Tanaka said. "High oil prices are driven by fundamentals."
Meanwhile, during a visit to Berlin, U.S. Treasury Secretary Henry Paulson said "there don't seem to be any obvious short-term solutions" to soaring oil prices.
Light, sweet crude for August delivery rose 97 cents to settle at $140.97 a barrel on the New York Mercantile Exchange. Prices at one point rose as high as $143.33, just 34 cents shy of Monday's trading record.
ABC News quoted an unnamed senior Pentagon official as saying there is an "increasing likelihood" that Israel will strike Iran's nuclear facilities before the end of the year. Such an attack could prompt Iran to retaliate, potentially disrupting oil supplies in the strategically vital Persian Gulf.
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill., called the report "more of the same" but acknowledged it was having an effect on energy market psychology.
"The market's forced to insert some type of risk premium on geopolitical developments," he said.
Iran is the world's fourth-largest oil producer and OPEC's second-largest exporter. About 40 percent of world oil export tanker traffic passes through the narrow Strait of Hormuz at the mouth of the Gulf.
State Department spokesman Tom Casey said he had "absolutely no information that would substantiate" the ABC report when asked about it at a briefing.
In the U.S., gas station operators nudged the record for a gallon of regular a tenth of a penny higher, to an average of $4.087 a gallon nationwide, according to AAA, the Oil Price Information Service and Wright Express.
In a weekly report Tuesday, MasterCard's SpendingPulse survey found that U.S. demand for gasoline fell 2.1 percent last week compared with the same week a year ago, and is off by an average of 2.9 percent over the past four weeks.
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