KEY POINTS:
Oil hit a record above US$84 a barrel on Saturday on mounting tensions between Turkey and northern Iraq and lingering supply concerns ahead of the Northern Hemisphere winter.
US crude settled up US61c at US$83.69 a barrel, after trading up to a record US$84.05 a barrel earlier. London Brent crude climbed US40c to US$80.55 a barrel.
Though oil prices have quadrupled since 2002, when adjusted for inflation the price is still below the US$90-a-barrel peaks at the time of the Iranian revolution in 1979.
Prices jumped after the Kurdistan Workers Party said it would move back into Turkey from northern Iraq and target the Turkish government, highlighting tensions in a region that pumps a third of the world's oil.
Iraq's oil exports through Turkey have been virtually idle since the US-led invasion of Iraq in March 2003 due to sabotage attacks, and most of Iraq's oil is exported from the country's south.
The rising tensions added to worries of a supply crunch during the Northern Hemisphere winter after declines in US and European fuel inventories.
The latest snapshot of oil supplies in top consumer the United States showed a 1.7 million barrel fall in crude oil stocks last week to the lowest level since January.
European oil stocks have also slimmed.
"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."
US Energy Secretary Sam Bodman said the US economy has proved "remarkably resilient" to strong oil prices and that markets may not need a second hike in crude output from the Organisation of Petroleum Exporting Countries.
Opec agreed last month to boost crude supplies by 500,000 barrels per day starting next month.
But many analysts have called the move insufficient to avert a squeeze this winter when cold boosts heating oil demand.
Adding support, US retail sales rose solidly last month while a key inflation gauge remained muted, data on Friday showed, suggesting the economy retained some buoyancy despite concerns about a weakening housing sector.
Markets were also eyeing an escalation in tensions between Washington and Ankara, a crucial ally for the United States which relies on Turkey as a logistical base for the Iraq war.
Turkey's Prime Minister, Tayyip Erdogan, said relations between Turkey and the United States were in danger over a United States resolution branding massacres of Armenians by Ottoman Turks during World War I as genocide.
- Reuters
