NEW YORK (CNN/Money) -
Oil prices jumped above $47 a barrel Wednesday, hitting new record highs, on fresh worries about worldwide supplies.
The gains came despite news that the Iraqi cleric behind the insurrection in Najaf agreed his militia will leave a holy shrine after a threat by the Iraqi government to "liberate" the site.
Light crude for September delivery jumped as high as $47.39 a barrel in New York after the Energy Information Administration said domestic crude oil inventories fell by 1.3 million barrels last week and finally settled at $47.27, up 52 cents, a record close.
London Brent rose 4 cents to $43.03.
Wednesday's rally had traders talking about how much higher prices could go.
"It seems like we're going to have to rendezvous with the $50 level," said Peter Beutel, oil analyst and president of energy consultant Cameron Hanover, predicting that crude prices would hit that price by the end of the month.
"Eventually these prices will stop the economy from growing," he said.
The main southern pipeline in Iraq has been closed for the most part since Aug. 9 due to sabotage, restricting export flows to about one million barrels daily, half normal supply rates.
Adding to the unrest, insurgents fired a mortar bomb in central Baghdad Wednesday near the venue where Iraqi leaders were meeting to select an interim national assembly.
Supply fears unfounded?
Analysts agreed that a decline in crude stocks will support prices.
"One of the big problems is that it seems there's no supply to see us through the end of the year," said Beutel, adding that demand typically increases through the fourth quarter.
"With little supply, every new disruption will push up prices, and it's inevitable that we'll see more disruptions, be it another storm, more unrest in Iraq or more news from (troubled Russian energy company) Yukos," said Beutel.
But Fadel Gheit, an oil analyst at Oppenheimer, said record-breaking prices are a result of pure speculation by hedge funds and commodities traders, not a result of negative market fundamentals, adding that there is no real supply shortage.
"But rumors and speculation have taken over the market," said Gheit. "For example, it is ridiculous to believe that Yukos is a real threat. Even if they shut down production, which Russia would not allow, they could maintain their current export volume, because they are limited only by capacity, not by production. And Russia has plenty more oil waiting to be exported."
Economic fall ahead
U.S. oil demand is up 3.5 percent so far this year, despite climbing prices, and overall U.S. consumer prices fell for the first time in eight months this July. Analysts say this indicates that underlying inflation pressures are largely under control, despite emerging signs in other major economies that rising energy costs are starting to take a toll.
Gheit said there is no way the U.S. can remain immune to pressures created by soaring crude prices.
"The U.S. and global economies are like the walking wounded," said Gheit. "It's not a matter of whether they will fall, but of when."
"The U.S. uses 20 million barrels of oil a day. Prices are currently inflated by about $15 a barrel, and that additional cost is effectively a $300 million dollar-a-day tax on Americans, eating away at disposable income for people in this country," said Gheit, adding that no tax break would be able to offset an amount that large.
U.S. oil has set all-time highs in all but one of the previous 13 trading sessions, and it is nearly $10 a barrel, 26 percent higher, than at the end of June.
Beutel was doubtful that prices will fall anytime soon, even if fundamentals are positive, because he said any news in such a bullish market will drive prices up.
"But oil is unlike all other commodities," said Gheit. "It is a political commodity. We will go to war to protect it, to ensure adequate supply, which makes it very, very hard to predict."
-- wire reports contributed to this story