NEW YORK (CNN/Money) -
Oil prices topped $51 on Tuesday to set another record as a long disruption in the Gulf of Mexico from Hurricane Ivan caused concern about winter heating fuel supplies and set off a round of speculative buying.
The November contract for U.S. light crude ended the day up $1.18 to settle at $51.09 a barrel on the New York Mercantile Exchange. November Brent crude rose 91 cents to a settle at $47.10, after reaching an intraday record of $47.25 a barrel.
In the Gulf of Mexico, nearly 29 percent or about 480,000 barrels per day (bpd) of oil output remains shut three weeks after Hurricane Ivan first hit the region, the U.S. Minerals Management Service said Monday.
"Fair value is probably not too far from these levels," Emanuele Ravano, head of portfolio management at PIMCO, told Reuters. "If you look at the longer term factors there is still clearly demand inelasticity and poor infrastructure."
Officials from the Bush administration told Reuters that climbing prices do not pose a major threat to the U.S. economy as policymakers from around the globe watched the price of crude oil climb, worried that record highs would threaten the world economic recovery.
Council of Economic Advisers Chairman Gregory Mankiw said every $10 increase in the cost of the barrel of crude cuts gross domestic product growth by just one-third to one-half a percentage point over a year or two.
"Such a decline would be an unwelcome headwind for the continuing recovery but it would not reverse the upward trajectory that we've been on," Reuters quoted Mankiw as saying.
Supply fears
Supply anxiety is building ahead of the northern hemisphere winter, when demand for heating oil surges. Inventories of crude and distillates in the world's top energy user, the United States, are running as much as four percent below last year.
"It looks like the market is convinced we need to catch up for the winter and that because of the slow recovery in the Gulf of Mexico, we have lost valuable time," Phil Flynn, analyst at Alaron Trading in Chicago, told Reuters.
Indications of U.S. supply should become more clear when the Energy Information Administration releases its inventory figures for last week.
Analysts expect the Wednesday report to show crude stocks rising in the week ending Oct. 1 by 1.1 million barrels from the week earlier.
A Reuters poll of eight analysts also predicted on average a fall in distillate stocks -- including heating oil, the main winter fuel in the Northeast of the country -- by 800,000 barrels and a drop in gasoline stocks by 600,000 barrels.
Tuesday's jump in oil prices came after OPEC's president said crude may fall below $40 a barrel if security in the Middle East, particularly in Iraq, improves.
An internal line linking the Iraq's north and south fields was hit by saboteurs Monday, although that did not affect exports.
--from staff and wire reports
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