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Oil price soars to new high

Associated Press

SINGAPORE -- Crude oil continued to move upwards to fresh highs today as the market took stock of a possible strike in Nigeria and the sluggish revival of output in key Gulf of Mexico oil fields following hurricane damage.

After settling at a record close of $52.02 per barrel Wednesday in New York, crude for November delivery on the New York Mercantile Exchange reached $52.62 per barrel in mid-afternoon Asian trade. In London, November Brent also climbed past its closing record, up 41 cents at $48.40.

The U.S. Energy Department said Wednesday that oil demand was growing and high consumption in economies like China will not ease, while producers are pumping close to capacity.

Markets continue to roil over the longer-than-expected production snags in the Gulf of Mexico -- where production is 478,000 barrels per day below normal and oil output is down by more than 16 million barrels since Sept. 13.

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The U.S. Minerals Management Service said Hurricane Ivan punched holes in the network of oil and natural gas pipelines in the Gulf of Mexico, causing oil and gas to leak out at numerous points along the thousands of miles of pipelines. Authorities are still unsure how many oil spills were caused by cracked pipelines.

In one spill at a Shell Oil Co. pipeline about 30 miles east of Venice, Louisiana, near the mouth of the Mississippi River, crews had gathered about 100,000 gallons of water polluted with oil.

"Nigeria, Iraq, hurricanes, they are not the cause (of the spike), they are contributing factors. The cause is demand, and refining capacity has failed to meet demand," said Esa Ramasamy of energy reporting agency Platts in Singapore.

Ramasamy said that, with no clear picture on actual stockpiles in many key oil-consuming countries, there is increasing speculation on pricing, especially with the Northern Hemisphere winter approaching.

While oil prices are 64 percent higher than a year ago, when adjusted for inflation, they remain about $28 below the peak reached in 1981.

Meanwhile, Nigeria's main oil workers' union said it would join a national strike, set to begin next week, unless the government agreed to talks on rising fuel prices.

Nigeria, which produces more than 2 million barrels of crude daily, is the world's seventh-largest oil exporter and fifth-largest source of crude for the United States, the world's biggest consumer of petroleum products.

A major worry among analysts is the world's limited excess oil-production capacity, or supply buffer, which is hovering around 1 percent above robust global consumption of 82 million barrels per day. As a result, fears of supply disruptions in Russia, Venezuela and Nigeria have pushed prices higher for several months.

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Also Wednesday, the Energy Department reported that commercially available inventories of crude grew by 1.1 million barrels to 274 million barrels. That follows an increase of 3.4 million barrels in the prior week, but still leaves inventories 4 percent below year ago levels.

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