Updated from 2:08 p.m. EDT

Oil prices ended squarely above the $45 mark for the first time Thursday as violence in Iraq and the threat of severe weather along the Gulf Coast kept buyers in control.

Nymex crude for September delivery settled at $45.50, up 70 cents, or 1.6%, topping Monday's record futures contract close of $44.84.

A U.S.-led effort against Shiite rebels loyal to Muslim cleric Moqtada-al-Sadr in the Iraqi city of Najaf raised fresh tensions in the market. Traders worried the offensive effort would be met with more sabotage on Iraqi infrastructure, including the southern oil pipelines, which presently carry roughly one half of Iraqi oil for export.

Meanwhile, the U.S. has shut down roughly 25% of its Gulf of Mexico oil production in preparation for tropical storm Bonnie. This translates into a decrease of about 1.7 million barrels per day until operations can resume.

On Thursday, the Saudi government announced that it was ready to tap its 1.3 million barrels per day of excess capacity. Saudi Arabia is currently pumping 9.3 million barrels per day of crude, and some believe that Saudi Arabia has very little spare production.