Updated from 4:07 p.m. EDT
Oil futures continued their recent surge Wednesday, closing at another near 14-year high after a Department of Energy report said inventories grew only slightly in the most recent week.
The report added to existing worries about supply, which were triggered earlier in the week by a weekend attack on foreign oil workers in Saudi Arabia.
Light sweet crude for June delivery climbed for the eighth successive day Wednesday, rising 59 cents, or 1.5%, at $39.57 in regular trading on the New York Mercantile Exchange. That's the highest close since October 1990, after Iraq had invaded and occupied Kuwait.
Jan Stuart, vice president of energy research at Fimat USA, said anticipated gasoline scarcity in the U.S. contributed to the recent price spike, as did security concerns and the weekly DOE numbers.
"If you had suggested to me a month ago that prices would go to $40 a barrel, I would have said you were nuts," he said. "It could happen tomorrow, it could happen today, but it might not happen at all."
The DOE's weekly report said supplies increased only 100,000 barrels in the week ended April 30 to 289.9 million barrels, below analysts' expectations and below the five-year average. Refiners stepped up their operations as well, using 93% of their capacity.
Prices closed at near 14-year highs Tuesday and Monday.
Five foreigners were killed Saturday in a shooting attack in Yanbu, an oil production center on the Red Sea coast. The attack prompted U.S. Ambassador James C. Oberwetter to urge Americans living near the site of the shooting to leave the country. Saudi Arabia's interior ministry later identified the mastermind of the attack as a Saudi dissident living in London.
Saudi Arabia is the world's largest oil exporter, and it produced an average of 8.4 million barrels a day in March. The kingdom is capable of producing more than 10 million barrels a day and has a history of increasing production when market conditions and geopolitical events warrant it.
The Organization of Petroleum Exporting Countries expressed concern at rising U.S. oil prices, according to media reports, and OPEC will examine the market at a meeting of producing and consuming nations in Amsterdam on May 22-24.
"It's an unusual meeting -- there haven't been too many of them," said Stuart, who added that the Saudi-supported talks were scheduled before the recent price spike.
OPEC has been criticized recently for contributing to tight supplies, although the cartel says it is producing 1.86 million barrels a day over its production target of 23.5 million barrels. OPEC President Purnomo Yusgiantoro on Wednesday sought to soothe market concerns but declined to say whether the cartel is likely to raise production levels at a meeting in Beirut on June 3,
Stubbornly high crude oil prices this year have yet to hurt the overall U.S economy, but airlines in particular have complained about high prices' negative impact on operating profits. Some carriers have resorted to fuel surcharges to help offset the higher costs, but they've had trouble making the measures stick.
Higher crude costs have also driven up gasoline prices, which are now above $2 a gallon in parts of the country, including California, and have become something of a presidential election issue.
Gasoline prices also rose Wednesday, hitting $1.31 a gallon on the June futures contract, prompting worries of summer gasoline shortages and a slowdown in consumer spending. Wholesale prices have risen sharply since April 21, when they were at $1.13 a gallon, Stuart said.
"People are less flexible, and they'll have less money to spend on other goods and services," said Gary Schlossberg, chief economist at Wells Capital Management. "If we see further increases you'll see more noticeable dampening on consumer spending. You're losing the benefit of the tax cut, and a lot of the stimulus."
Oil prices flirted with the 1990 highs last winter in the run-up to the war against Iraq, but never closed at that level.