SINGAPORE (Reuters) -Oil prices were steady on Thursday but within striking distance of record-high levels on concerns that a storm could strengthen into a hurricane and threaten oil production in the Gulf of Mexico.
U.S. light crude for September delivery rose 2 cents to $75.83 a barrel by 0335 GMT, rising for a fourth session and extending Wednesday’s 90-cent gain. Prices are now $2.57 off record-peaks of $78.40 a barrel.
London ICE Brent crude rose 7 cents at $76.96 a barrel.
Analysts said Tropical Storm Chris, the third named storm of the Atlantic hurricane season, was the main driver of oil’s rally, while unresolved conflicts in the Middle East added support.
“Despite reports that Chris is weakening now, there is still every possibility that it will gather strength and threaten the rigs in the Gulf of Mexico,” said Tobin Gorey, a commodities strategist with the Commonwealth Bank of Australia.
“Oil companies are taking no chances and are likely to evacuate their rigs over the weekend so there will be some disruption. If damage caused by the storm becomes severe, prices could just shoot past all major resistance points.”
Tropical Storm Chris, headed from the Caribbean, has weakened slightly, after the Miami-based National Hurricane Center said on Wednesday it could strengthen into the season’s first hurricane.
Hurricanes last year shut in a quarter of U.S. crude and fuel output and sent oil to then-record highs. Around 12 percent of the U.S. Gulf of Mexico’s 1.5 million barrel-per-day (bpd) oil output is still offline.
Fuelling bullish sentiment, U.S. government data released on Wednesday showed crude oil stocks fell by a higher-than-expected 1.8 million barrels to 333.7 million barrels last week.
However, gasoline inventories, which had been expected to fall, were stable, dipping only 100,000 barrels, against expectations of a 1.6-million barrel draw. U.S. gasoline demand in the past four weeks still averaged 1.6 percent above the same period last year.
High crude oil prices have had some impact on U.S. economic growth but the pain is not on the level seen during the energy price shocks of the 1970s, U.S. Energy Secretary Sam Bodman said on Wednesday.
In the Middle East, the situation remains tense as hostilities between Israel and militant group Hizbollah raged on in Lebanon despite efforts by the international community to produce a ceasefire.
Hizbollah fired more rockets into Israel on Wednesday than on any other day in a war that has entered its fourth week, while Israeli jets continued to pound the guerrilla group’s Beirut stronghold. Traders fear the conflict could spread to Middle East oil producers.
Adding to worries over supplies, an Iraqi pipeline carrying crude from the country’s northern oilfields to Turkey’s Ceyhan port was bombed on Monday, pushing back the planned restart of exports along the route.
Concerns over Iran persisted as President Mahmoud Ahmadinejad insisted on the country’s right to produce nuclear fuel, despite a United Nations resolution demanding that Tehran suspend its nuclear activities by August 31 or face the threat of sanctions.