Oil jumped to a record high above $US75 a barrel on Wednesday on strong US demand and ongoing tensions over Iran's nuclear program.
US crude futures reached a record settlement of $US75.19, up 1.7 per cent, or $US1.26, on Wednesday, after hitting an all-time intraday trade high of $US75.40.
The market was closed on Monday and Tuesday for the Independence Day holiday.
London Brent crude rose $US1.47, or 2 per cent, to $US73.98.
A dispute between OPEC nation Iran and the West over Tehran's atomic ambitions helped drive prices to a then-record $US75.35 in April as investors feared potential supply disruptions from the world's fourth-biggest crude exporter.
News that Iran had postponed a planned meeting with the European Union to discuss incentives to end the standoff supported crude's rise.
EU foreign policy chief Javier Solana had been due to meet Iranian nuclear negotiator Ali Larijani on Wednesday.
They are now scheduled to meet in Brussels on Thursday and July 11.
Solana, surprised by Larijani's sudden postponement, made clear the West wants a quick answer on its incentives for Iran to halt uranium enrichment.
"From the oil market's perspective, the intensity of the confrontation has not changed," said Michael Wittner of Calyon investment bank.
"We're not closer to a resolution of the crisis, but it hasn't escalated. We're trapped in no man's land."
Oil also rose as geopolitical tension heightened after North Korea, labeled by President George W Bush as part of an "axis of evil," launched a series of missiles into the Japan Sea.
The missiles included a long-range one able to reach Alaska, although it apparently failed 40 seconds into its flight, US officials said.
Lingering concern over Iran and still robust consumption in the United States and China, the world's biggest fuel burners, also helped crude climb recently.
"It was only a matter of time that we would see new highs," said Tom Bentz, analyst at BNP Paribas Commodity Futures.
"The geopolitical concerns have provided the main support, while gasoline has taken over the lead lately as we head into peak demand season."
Gasoline futures rose on forecasts that US demand increased last week ahead of the Independence Day holiday weekend.
US oil inventory data to be released on Thursday is expected to show a fall in crude and gasoline supplies last week, according to a Reuters poll of analysts.
US crude rallied more than $US3 a barrel last week as US drivers hit the roads for the summer holidays.
"After gasoline inventories began to fall last week the key focus is now where they go this week," said Gerard Burg, energy economist at the National Australia Bank.
"The market wants to see if stocks are adequate to get through the summer driving season, especially as supply could be disrupted by more hurricanes."
US retail unleaded gasoline prices rose nearly 7 cents to average $US2.93 a gallon last week, just below the record of $US3.056, the Energy Information Administration said on Monday.
While US demand remains strong, European motorists have adjusted their habits as prices soar, according to Thierry Desmarest, Chief Executive of French Total.
"The large European countries, for the first half of this year, the consumption of motor fuels has declined," Desmarest told reporters on the sidelines of a conference in London.
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