WASHINGTON -- Jitters over potential supply disruptions dominated oil markets yesterday, undermining Saudi Arabia's effort to soothe those concerns by saying it could immediately boost daily output by 1.3 million barrels.
The Saudi comments briefly drove crude futures sharply lower, although prices later reversed course and ended four pennies below their record high as concerns surrounding Russian oil giant Yukos weighed on traders' minds.
Concerns about supply tightness were reinforced by a report showing US inventories of crude shrank last week and oil companies saying they were abandoning facilities in the Gulf of Mexico due to a tropical storm.
After dropping as low as $43.30 per barrel, light crude for September delivery settled at $44.80, up 28 cents on the New York Mercantile Exchange. On London's International Petroleum Exchange, Brent crude futures closed at $41.57, up 29 cents.
World oil prices have been soaring due to strong demand, fears of terrorist attacks, disruptions to Iraqi crude exports and financial troubles at Russia's largest oil producer, Yukos, which is in a battle with the government over billions in back taxes.
Also yesterday, the International Energy Agency said that while the world oil market is tight and uncertain, supply still exceeds demand and that the soaring prices were unjustified. However, the IEA said the trend in the futures markets suggested it was unlikely that prices would decline significantly in the near term.