Updated from 8:21 a.m. EDT
Crude futures shot higher again Friday as the market grew paranoid about the ability of the world's major oil suppliers to meet surging demand.
In New York, Nymex crude for September delivery ended regular trading up $1.07, or 2.5%, to $43.82 a barrel, the highest close in the two-decade history of the contract. It set an all-time record of $43.85 earlier in the session. In London, Brent crude traded up 77 cents, or 2%, to $40.02 a barrel.
The gains put an unceremonious end to a daylong easing in which Nymex futures slid 15 cents to $42.75, suggesting considerable technical support is materializing just below $43 a barrel. Wholesale oil currently costs about 40% more than it did a year ago, reflecting lingering geopolitical entanglements in the Middle East, the tax dispute involving Russian titan Yukos and rising worldwide demand.
The demand calculus again turned bullish for longs Friday morning after the International Energy Agency, an independent consultancy, predicted that worldwide consumption in 2004 would be some 2.5 million barrels a day higher than it was in 2003. The IAE said more oil than ever is being used in the U.S. and China, a trend made all the more troublesome by the inability of major producers to add any significant capacity.
Demand has been additionally constricted this year by sporadic terror attacks in Iraq and labor strikes in Norway and Nigeria, two major suppliers.
The decline Thursday came as the Russian government said Yukos can continue with business as usual, after the company Wednesday suggested it might have to stop exports from its Siberian production unit as a result of a government crackdown meant to collect disputed back taxes.
Traders have been worrying about the potential for such a drop in exports for several weeks, with speculation growing that Yukos might be forced into bankruptcy should the tax dispute escalate. Russia is the world's second-largest oil exporter after Saudi Arabia and the world's largest independent producer. The country's oil sector has ramped up production in recent years after a long decline that started in the waning days of the Soviet Union.
OPEC two weeks ago said it had decided on an increase in its daily production ceiling by a half-million barrels a day in August, and also canceled a July 21 meeting on the issue.
The measure was part of a broader agreement reached at OPEC's June 3 meeting, when it decided to increase official production by 2 million barrels a day in July. Prices touched a record high of $42.33 a barrel right before that meeting.
The August increase will put OPEC's official production ceiling at 26 million barrels a day, although its members routinely produce more than their individual quotas. A recent International Energy Agency report said the cartel produced more than 28 million barrels a day in June, when its ceiling was just 23.5 million barrels.