Oil futures rallied to a new all-time high over $88 a barrel. There are concerns about disruptions to Middle Eastern crude supplies and a growing view that domestic supplies are not sufficient to meet fourth-quarter demand.
Traders are concerned that a Turkish incursion into Iraq in search of Kurdish rebels could disrupt crude supplies from northern Iraq.
"Whenever there is any escalation in political tensions in the Middle East, oil markets become concerned," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney. "There is production and there are pipelines that people worry may be affected if there are any issues in Iraq."
On Tuesday, Turkey's prime minister said Monday's decision to ask Parliament for permission to pursue the rebels was not a sign Turkish forces will act immediately.
The Middle East tensions add to supply concerns that have been stoked in recent days by reports from the Energy Department, the International Energy Agency and the Organization of Petroleum Exporting Countries suggesting oil supplies are flat or falling as demand is growing.
Light, sweet crude for November delivery rose $1.48 to settle at a record $87.61 a barrel. Earlier, prices rose as high as $88.20, a trading record.
Despite the gains, oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
Many analysts argue that the supply and demand fundamentals don't support oil in the high $80 range, and believe speculative investing is the real culprit behind high oil prices. And as long as investors are willing to keep buying, prices will keep rising.
"It still doesn't act like a market that has placed a high," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
Also Tuesday, November gasoline rose 1.62 cents to settle at $2.1737 a gallon on the Nymex, while heating oil futures rose 3.15 cents to settle at $2.3387 a gallon.
Natural gas for November fell 7.8 cents to settle at $7.367 per 1,000 cubic feet after a storm in the Gulf of Mexico appeared to weaken, becoming less of a threat to critical gas and oil infrastructure.
Despite oil's gains, some analysts think domestic oil supplies are rising. Analysts surveyed by Dow Jones Newswires, on average, expect the Energy Department's Energy Information Administration to report Wednesday that crude supplies grew by 1 million barrels last week.
Gasoline inventories are also expected to have grown by 1 million barrels, while inventories of distillates, which include heating oil, likely fell by 400,000 barrels.
Refinery activity likely rose by 0.4 percentage point to 88.2 percent of capacity, the analysts predict.
The shooter freely entered the building of the university and opened fire at those who were present on the ground floor