Crude oil prices jumped Tuesday to their highest level since just after the U.S. invasion of Iraq, on signs that global supplies may remain tight in the near term.
Oil also was carried higher by a rally in gasoline futures amid strong motorist demand.
Near-term crude futures in New York surged $1.55 to $33.28 a barrel, the highest closing price since March 17. Oil had peaked at $37.83 a barrel on March 12, just before the start of hostilities in Iraq.
Prices fell as low as $25.24 in late April. But the strengthening global economy and production cutbacks by the Organization of the Petroleum Exporting Countries have lifted oil prices since the spring.
OPEC agreed to cut output by 900,000 barrels a day starting Nov. 1.
Crude supplies have become "too low" and may be unable to keep up with increased demand in the event of a colder-than-normal winter, said Claude Mandil, the International Energy Agency's executive director.
Meanwhile, terrorist attacks in the Middle East in recent weeks have led to speculation that shipments from the region could be threatened.
"There is a raft of reasons for us being higher," said John Kilduff, senior vice president of energy risk management at Fimat USA Inc. in New York.
Although U.S. crude inventories are slightly higher than a year ago, they remain below the 300-million-barrel mark, which is considered comfortable.
The rally Tuesday stemmed partly from speculators, including managed commodity funds, trying to play the market's momentum, analysts said.
Also, gasoline rose as traders purchased futures to guarantee sufficient supplies in coming weeks.
Gas consumption last month was the highest for any October on record as U.S. economic growth bolstered personal income and spurred more travel and shipping. Gasoline supplies are at a three-year low on the East Coast.
"Gasoline stocks are low, and supplies seem especially tight in the New York harbor market," a key delivery point, said Tim Evans, analyst with New York-based researcher IFR Pegasus.
Gasoline for December delivery rose 4.8 cents to 91.57 cents a gallon in New York. It was the highest closing price for a near-month contract since Aug. 29.
In the face of energy supply concerns, investors are looking for signals on future output policy from OPEC, which controls half the world's crude exports.
The cartel is scheduled to meet on Dec. 4 to set policy for early next year.
Consumers and some non-OPEC exporters, notably Russia, have called on OPEC to release more oil, but the cartel has said it would keep a tight rein on production to stop inventories from building up.