Oil creeps to new high of $67.49

Oil prices crept up to settle at a new high Thursday, taking their cue from a rally in gasoline futures. But analysts said the momentum was somewhat bewildering given the easing of concerns about a storm expected to move into the Gulf of Mexico.

Tropical Storm Katrina trudged toward Florida's southeastern coast on Thursday and forecasters expected it to strengthen to a weak hurricane before making landfall overnight. But the U.S. National Hurricane Center said after the storm moves into the Gulf of Mexico, it could turn to the north and eventually strike the state's Panhandle early next week — a path that would keep it away from the heart of the oil and gas producing regions of the Gulf.

"Today was a golden opportunity to sell off," said analyst Phil Flynn at Alaron Trading Corp. in Chicago. "One would think that with Katrina going off in a different direction, the market would too. But it didn't."

On Wednesday, fear that Katrina would disrupt oil and natural gas production in the region was the main catalyst pushing October crude futures on the New York Mercantile Exchange to a record close of $67.32 a barrel.

"The market really went bonkers about this storm, even more than usual," Flynn said. "That tells me this market is looking for excuses to drive higher."

Crude futures gained 17 cents to settle at $67.49 on Thursday, the highest closing price since oil began trading on Nymex in 1983. On an inflation-adjusted basis, oil prices would need to hit about $90 a barrel to match the highs of 25 years ago.

Crude futures briefly touched $68 a barrel in overnight electronic trade, reflecting the market's longstanding jitters about rising demand and the limited amount of excess production capacity around the world. Stoking bullish sentiment was a U.S. supply report that showed a decline in gasoline inventories and China saying its crude imports spiked in July. Traders also eyed a refinery snag in California.

Still, the fear of supply troubles exceeds the actual tightness in the market, traders said.

"From a purely fundamental basis, the market shouldn't be within $20 of the crude price that we're seeing," said oil broker Aaron Kildow of Prudential Financial. "But people are reluctant to sell."

Gasoline futures surged 3.79 cents to $1.9637 a gallon on Nymex, where heating oil rose less than a penny to $1.8695 a gallon.

In London, Brent crude futures on the International Petroleum Exchange climbed 26 cents to $66.27 a barrel.

"The market sentiment is not whether crude will one day reach $70, the question is when," said Victor Shum, energy analyst at Texas-based consultants Purvin & Gertz in Singapore. "We are now heading into the fourth quarter, a seasonally higher demand period."

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Contributing: Brad Foss; En-Lai Yeoh