Oil nears $60 on Nigeria violence

Demand for oil in the United States is helping to keep prices high

Crude oil prices rose to a new high of more than $59 a barrel on Monday as the market was disturbed by threats to western consulates in Nigeria.

US light crude hit $59.52 a barrel before settling up 90 cents at $59.37. London Brent futures rose 56 cents to $58.32 a barrel, from a high of $58.58.

Oil prices have risen more than 30% this year, prompting Opec to increase output by 500,000 barrels last week.

Experts say prices will continue rising because of a lack of refining capacity.

The market is also being driven up by heavy demand for oil in the United States - where car use is on the rise because of the summer holidays - and in China where industrial production is racing ahead.

Disruption concern

The latest spike came after the United States, Germany and UK closed their consulates in Lagos, Nigeria's largest city, after threats from Islamic militants.

Follow the ups and downs of US crude prices

The closures followed last week's kidnapping of six Shell oil workers in Nigeria, who were released on Saturday.

Nigeria is the world's eighth largest oil producer and a key supply source for the United States.

Available oil supply is extremely tight in the global oil market, ensuring that any potential disruption to output will inflate prices.

Opec sought to relieve the pressure on prices last week by lifting its daily production quotas by 500,000 barrels to 28 million barrels a day.

The oil producers organisation also pledged a further similar rise if prices remained at their current level.

However, experts have questioned whether Opec's actions will have any impact because its members have already unofficially exceeded the threshold, pumping close to 30 million barrels a day.

Summer demand

Supply is tight and demand is still growing Tobin Gorey, Commonwealth Bank

There are concerns that refiners will not be able to meet spiralling demand for oil in the second half of the year with stocks of US distillates - diesel and heating oil - running below-average.

Demand for petrol in the US is 3% higher than last year

"The oil market is on a permanent test - can it keep up with demand in any one period," said Tobin Gorey, Commonwealth Bank commodities analyst.

"Supply is tight and demand is still growing."

New landmark

Analysts believe that a combination of strong demand, potential threats to supplies and market speculation will push prices above $60 a barrel before too long.

"We saw last week's expectation being built that US refineries would struggle to meet the demand of the driving season," said Daniel Hynes, an energy analyst with ANZ Bank.

"This is likely to provide support for the coming month."

Oil prices topped $50 a barrel for the first time last October.