'Even without a possible Iranian oil disruption, we could go to $75 to $80 a barrel' - Olivier Jakob of Petromatrix
An influx of fresh fund buying and geopolitical worries will most likely push oil prices to new record highs soon, analysts said, while the most bullish predicted prices to eventually climb to $100 a barrel.
Supply concerns in Nigeria, Iran and other key oil-producing countries have ignited US crude prices, up 13 per cent this year and within $2 of the all-time record high of $70.85, reached in late August 2005 in the wake of hurricane damage in the United States.
Analysts predicted the market to rally even further as high oil prices have failed to reduce global demand.
"It is pretty clear that we can break $70 without too much problem," said Deborah White, an analyst at SG CIB Commodities in Paris.
"We have been getting a massive injection (of investment fund money) in the commodity markets. It is very clear from the price action that they haven't stopped."
Analysts said prices could peak at around $80 a barrel, a level that matches inflation-adjusted prices set after the 1979 Iranian revolution.
Twenty-seven years later, the market is again focused on the Middle East country as Tehran battles with the West over its nuclear programme.
"Even without a possible Iranian oil disruption, we could go to $75 to $80 a barrel," said Olivier Jakob of Swiss-based Petromatrix, an oil analysis group.
To stay at those levels, Iran or some other major oil-producing nation would have to cut oil supplies, analysts said. This would then prompt the International Energy Agency to release emergency government reserves to keep markets from spiking even further.
Ian Henderson, fund manager at JP Morgan Fleming in London, took an even more bullish stance, saying prices would continue to climb as long as demand stayed strong.
"The ultimate deterrent for the market is when the price becomes too expensive for people to fill their tanks," he said.
"I think they will continue to carry out their travel plans even with oil prices as high as $100 a barrel.
I personally wouldn't stop driving."
Analysts agreed that Opec, the source of more than a third of the world's oil, would be of little help in a crisis.
The cartel, which is already pumping at near-maximum capacity, has repeatedly said it wants oil between the upper $50 to lower $60 range.
"Opec can make all the statements that they want, but they really can't do anything," Mr Jakob said.
But some analysts warned that the market could just as easily plummet.
"The current rally is crucially linked to whether the intensity of the current news flow can be maintained, particularly given the health of fundamentals in (the second quarter)," said BNP Paribas in a research note.
The IEA has repeatedly said world markets are well-supplied and that other OPEC producers have filled the Nigerian shortfall, now at around 500,000 barrels per day.
In February, prices fell by more than $11 in about two weeks after a huge rise in US fuel stocks and a slight easing of geopolitical tensions.
"The rapid fall in the oil price in the first half of February should remind the market how compelling fundamentals can also prove at times," BNP Paribas said.