Updated from 11:02 a.m. EDTOil prices Tuesday closed within a half-dollar of their recent record high, having traded above $42 a barrel during the session. The benchmark U.S. crude added 40 cents, or 1%, to $41.84 in regular floor trading on the New York Mercantile Exchange, within striking distance of the $42.33 closing level touched in early June. At one point, prices touched $42.22. Gasoline prices ended a fraction of a cent lower at $1.244 a gallon. Traders may have good reason to challenge the record high Wednesday, when two closely watched weekly surveys on energy inventories are released. Traders have been focused on short-term supply issues in recent months as attacks on Iraq's oil infrastructure, strikes in Nigeria and Norway, a tax dispute between Russia's largest oil company and the government, and periodic terror attacks on oil workers in Saudi Arabia have caused routine price spikes. Unusually strong global demand -- partly because of the roaring Chinese economy -- also has contributed to market worries about supply. OPEC two weeks ago said it had decided on an increase to 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. At one point recently, oil prices had fallen 15% from their record high, closing below $36 a barrel in June. Since then, prices have bounced back, partly because of worries about a terror attack on the U.S. in the run-up to the November presidential election. In May, traders relentlessly bid up prices on short-term supply concerns triggered by strong global ahead of the peak summer driving season in the U.S. and Europe.