Middle East tensions cause price of crude to close at over $90 for first time.
In London, Brent crude also soared by $1.63 a barrel to end Monday’s trade at $90.32 after it too hit an intraday record of $93.80 – the first time it has broken through the $90 mark.
By mid-morning in Tuesday’s Asian trade however, the price of Brent had also dropped back to $86.91 a barrel.
Several factors are thought to be driving the price up, including concerns over tensions in northern Iraq and the nuclear dispute with Iran.
In Sudan, meanwhile, fighters in the Darfur region have raised the prospect of disrupting supplies in the country after they kidnapped five oil workers.
They have warned of further action unless oil countries operating in Sudan leave within the week.
Also pushing up prices in recent days have been worries over disruption to Mexico‘s oil supply.
On Sunday, Pemex, the state oil firm, said it would shut down about a fifth of production in the Gulf of Mexico due to an approaching tropical storm.
At the same time the weakness of the US dollar has boosted the price of dollar-denominated commodities – such as oil – helping the price of crude surge by more than 30 per cent since the middle of August.
After slipping back in Tuesday’s trade as investors took the opportunity for some profit taking, analysts said oil prices could surge again midweek if the US Federal Reserve cuts interest rates at its policy meeting Wednesday.
“What the US Federal Reserve will do in terms of interest rates will be something that traders will watch,” Victor Shum, an energy analyst with Purvin & Gertz in Singapore told the Associated Press.
“If indeed there is a rate cut, it may further weaken the US dollar.”
Last month the oil producers’ group Opec pledged to raise output by 500,000 barrels a day from November 1, but that seems to have done little to calm the market so far.
Opec has said it sees no reason for any further increase, blaming the price rise on speculators and a shortage of refineries rather than a shortage in supplies of crude.