Updated from 3:01 p.m. EDT

Oil prices reached another record high Thursday as traders focused on data showing demand for distillate fuels and gasoline is stronger than last year.

The August crude contract closed up $1.33 to $59.42 a barrel, surpassing its previous record close of $59.37 for a front-month contract, reached Monday. Gasoline futures also jumped 4 cents to $1.65 a gallon.

"The market is still very tight because of concerns over production capacity form OPEC and a peak demand in the fourth quarter," said Brian Hicks, portfolio manager of the global resources fund at U.S. Global Investors. "We are also seeing strong distillate demand while distillates inventory levels are 3% below the 10-year average."

Wednesday's Energy Department inventory report, which showed another drop in crude stocks and a smaller-than-expected gain in distillate fuels, said demand for distillates, such as heating oil and diesel, was up 6.9% last week compared with the same time a year ago. Demand for gasoline was 2.5% higher and jet fuel demand jumped by 3.4%.

Some analysts and economists look at these increases in demand as a sign of economic growth, further fueling their concerns that refining capacity won't be able to supply transportation and heating fuels.

But others see a different demand picture. "I am confused by the strong demand numbers," says Mark Zandi, chief economist at

Economy.com

. "Other data shows that actual U.S. gasoline consumption is 1% lower than last year." Zandi mentioned the Bureau of Economic Analysis report, which is used to determine GDP growth.

"U.S. consumer spending on gasoline is declining, which suggests consumers are responding to high prices," Zandi says.

That would support an argument previously discussed here that

Wednesday's demand numbers possibly indicate that local distributors, which aren't accounted for in the EIA storage report, have been purchasing more fuels to build up their winter storage supplies rather than an actual consumption growth.

Refinery throughput actually dropped last week, as production of both gasoline and distillates declined.

Crude inventories fell for the third consecutive week by 1.6 million barrels to 327.4 million.

In company news Thursday,

CNOOC

(CEO) - Get Report

launched an $18.5 billion cash bid to acquire

Unocal

( UCL), countering a bid from

Chevron

(CVX) - Get Report

that is roughly $16.4 billion in cash and stock.

Two Republican Congressmen in California have requested that an acquisition of Unocal by CNOOC be reviewed for security reasons, due to concerns that Unocal's drilling technology can be used for testing weapons, reports say.

Elsewhere,

Transocean

(RIG) - Get Report

is in the spotlight again with a $263 million deal it struck with Total Upstream Nigeria, just after it announced a $985 million deal in Brazil. The agreement with Total includes a two-year drilling services contract offshore West Africa. Shares of Transocean rose $1.65, or 2.9%, to $57.50.

"This not only represents a 78% increase above the current unit dayrate of $201,800, but it also represents a new record for a high-specification drillship contract award," Raymond James said in a note. Wachovia Securities upped its 2005 earnings estimate for Transocean to $1.61 a share from $1.57 based on the recent deals, and increased its 2006 estimate to $4.05 a share from $3.90.

Other companies in the drilling universe are trading higher Thursday, with

Diamond Offshore

(DO) - Get Report

up 4%,

Pioneer Drilling

( PDC) 3.8% higher, and

Nabors Industries

(NBR) - Get Report

up 2.4%.

Meanwhile, shares of

Infinity

(IFNY)

plunged more than 15% after it said four of its swells were producing amounts of gas which were "uneconomic." The presence of formation water and unrecovered fluids will "negatively affect" production rates until the flow of such fluids is reduced and alternative pumps or other artificial lift production equipment is installed, the company said.

Among the majors, shares were mixed trading higher.

Exxon Mobil

(XOM) - Get Report

inched lower by 0.04%, Chevron fell 0.23%,

ConocoPhillips

(COP) - Get Report

increased 0.15%,

Royal Dutch/Shell

( RD) added 0.42%, and

BP

(BP) - Get Report

gained 0.72%.