Oil prices dipped on Thursday but held near the previous day's record high above $80 a barrel, as dealers watched a hurricane in the Gulf of Mexico after a sharp fall in U.S. crude stocks.
U.S. crude traded 12 cents lower at $79.79 a barrel by 0839 GMT, after climbing $1.68 on Wednesday, when it hit a record of $80.18. London Brent crude shed 27 cents to $77.41.
Prices have climbed 31 percent this year and have quadrupled since 2002, as investors buy into worries over real and potential supply disruptions in producers such as Nigeria and Iran, growing consumer demand and infrastructure constraints.
"There is truly a fear factor on the supply side that is shaking the market," said Yonghun Jung of the Asia Pacific Energy Research Centre in Tokyo.
U.S. crude stocks fell a hefty 7.1 million barrels last week to their lowest level in eight months ahead of the winter heating season, government data released on Wednesday showed.
Adding to supply concerns, Hurricane Humberto on Thursday hit the Texas coast, a major oil-producing and gasoline-refining area, though industry officials have predicted little impact to operations.
Experts said OPEC's deal in Vienna on Tuesday to raise output by a half million barrels per day (bpd) starting November 1 was not enough to reverse rising energy prices.
"The delay in the output increase seems to indicate a high degree of compromise in the mechanics of the agreement. Overall, we believe the door to $80 and beyond remains open and beckons," said Barclays Capital in a report.
Strong oil fundamentals have lured investors looking to diversify away from markets dragged down by the U.S. subprime mortgage crisis, and dealers said fresh fund money continued to pile into energy.
(Reuters)