Oil prices held firm yesterday as China showed no let-up in its strong import growth and US Gulf producers reported damage to offshore rigs from Hurricane Ivan.
Supply worries were underpinned by concerns about exports from Russian oil giant Yukos as well as rising tensions between Iran and the United Nations over Tehran's nuclear ambitions.
New York light crude futures rose 15 cents to $46.50 per barrel, only $3 below record peaks struck in August.
London Brent gained 14 cents to $43.05 after climbing 46 cents on Monday when Yukos, Russia's embattled top producer, said it was trimming supply to China for the rest of this year due to a lack of funds.
Oil prices have jumped more than 40 per cent this year as strong demand growth in the US and Asia stretches global supplies.
Chinese data yesterday showed oil imports rising 37.4 per cent year-on-year in August, holding close to 40.7 per cent growth seen in July. Indian government data also showed oil firms processing 4.4 per cent more crude in August than a year earlier.
Opec oil producers are pumping at full tilt to meet demand, but their low-quality oil is proving unpopular with refiners because of its low yield of prized transport fuels.
The strong demand has magnified the impact of any threat to international supplies, such as Hurricane Ivan's rampage through the US Gulf last week.
Producers are restarting their operations in the wake of the storm, with only 700,000 barrels per day of crude output left shut as of Monday, but companies are discovering damage that could slow a resumption of normal production.
ChevronTexaco said on Monday crews discovered structural damage at "numerous" oil and gas production platforms on its Bay Marchand field.
Murphy Oil Co. said oil and natural gas production at the Medusa field will be out for as much as five weeks.
The recent spate of storms is expected to translate into lower US oil inventory levels when the government Energy Information Administration releases its weekly supply report today.
A Reuters survey of eight analysts forecast US crude inventories to fall by 5.3 million barrels in the week to September 17. That would make an eighth week of stockpile draws, bringing inventories to their tightest in more than six months.
Longer term worries over the security of Middle Eastern supply are underpinning prices.
"Potential for expanded Middle East tension is likely to provide fundamental support for prices following reports of Iran's refusal to comply with the IAEA's demand that it halts all uranium enrichment activities," said Standard Bank in a report.
This week, Iran rejected international calls to comply with a UN International Atomic Energy Agency demand that it stop uranium enrichment. Tehran denies hostile designs, saying its nuclear programme has only peaceful aims.
Yesterday, Israeli security sources said the United States planned to sell Israel $139 million worth of air-launched bombs, including 500 "bunker busters" able to penetrate Iran's underground nuclear facilities.