Oil held around $83 a barrel yesterday, within sight of all-time highs, on concerns over tightening supplies ahead of winter and mounting tensions between Turkey and northern Iraq.
Prices jumped after Turkish PKK rebels said they would move back into Turkey from northern Iraq, highlighting tensions in a region that pumps a third of the world's oil.
US crude rose 16 cents to $83.24 a barrel by 3.25pm GMT. The previous day it traded as high as $83.67, close to a record $83.90 struck on September 20. London Brent crude climbed 20 cents to $80.35.
Rebels from the outlawed Kurdistan Workers Party (PKK), fighting for an independent homeland in southeastern Turkey, also warned they would target Turkey's ruling AK Party and main opposition CHP.
Traders said the PKK statements had pushed prices higher.
Iraq's oil exports through Turkey have been virtually idle since the US-led invasion of Iraq in March 2003 due to sabotage attacks. Most of Iraq's oil is exported from the country's south.
Small amounts of crude have been shipped through Turkey recently to world markets, but supplies remain sporadic.
Oil has held mostly above $80 a barrel for the past month, reflecting worries about shrinking fuel supplies that on Thursday sent US heating oil prices to a new peak.
"I do think fundamentals are supportive of where the price is," said Tony Dolphin, director of economics and strategy at Henderson Global Investors.
"Demand continues to be boosted by the strength of the emerging economies. And not just China."
"Really you have to go back to the early 1970s to find a time when all bits of the developing world economy were firing on all cylinders as they are at the moment," Dolphin said.
"That is more than offsetting a bit of weakness in the US."
Strong demand seems to be mopping up inventories in both the US and Europe.
The latest snapshot of oil supplies in top consumer the US, for example, showed a 1.7 million barrel fall in crude oil stocks last week to the lowest level since January. ( Gulf )