Oil prices hit record highs above $78 in Asian trading hours on Friday, continuing to test unchartered territory as Israel's offensive in Lebanon and the Iran nuclear issue sparked fears of a wider Middle East conflict, dealers said.
SINGAPORE: Oil prices hit record highs above $78 in Asian trading hours on Friday, continuing to test unchartered territory as Israel's offensive in Lebanon and the Iran nuclear issue sparked fears of a wider Middle East conflict, dealers said.
They said oil now looked set to break $80 soon, with the upcoming September contract already quoted at above $79 as the market tightens on a series of geo-political concerns from the Middle East to North Korea.
The figure of $100 was also being mentioned as a distinct possibility.
That would put oil back level on a relative basis with prices during the "oil shocks" of the 1970s which plunged the Western economies into recession.
At 6.15 GMT, New York's main contract, light sweet crude for delivery in August, was quoted at $78.10 per barrel, up $1.40 from its last settlement of $76.70 in New York.
Oil pushed higher still to hit an all-time high of $78.40 in after hours electronic trade before some profit-taking took it off the top.
Brent North Sea crude for August delivery was at $77.52, off its high of $77.76.
"It seems like hitting $80 a barrel is inevitable," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.
"We're in unchartered territory. It is a result of a confluence of a number of geo-political events in a tight market that shows healthy demand growth.
"The factors are getting together in a tight market and we haven't even got our first hurricane in this US hurricane season, so pricing is going to remain strong."
Shum said oil at $100 a barrel "is still quite a bit off from where we are today (but) there is certainly the potential for it to hit that."
Tony Nunan, the Tokyo-based manager for energy risk management at Mitsubishi Corp, agreed $100 oil is now a possibility.
"I don't want to cause panic in the market ... but I think the market has to understand that triple-digit (oil prices) are not a fantasy anymore and are definitely possible," he said.
"We'll definitely be seeing $80. It could either gradually escalate ... or it could explode."
On Friday, Israeli warplanes struck Hezbollah's power base in pre-dawn raids after a day of relentless attacks on Lebanon that left around 50 people dead and ignited fears of a regional war that could disrupt oil supplies.
Israeli Prime Minister Ehud Olmert ordered the army to intensify the offensive against Lebanon after a barrage of rockets hit towns in northern Israel, including the Mediterranean port city of Haifa, killing three people.
In a wave of strikes early Friday, Israeli jets pounded Hezbollah's command headquarters in Beirut's Shiite-dominant southern suburbs, a power station, bridges and a Palestinian guerrilla base in eastern Lebanon.
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