Crude oil jumped to US$60.47 amid supply concerns in the U.S.

Crude oil prices smashed through the psychologically important US$60 barrier in heavy Asian trading on the New York Mercantile Exchange, reports AP. Oil prices jumped amid concerns that supplies would not meet demand, especially in the U.S., the world's largest energy consumer.

Oil was up 61 cents at $60.45 a barrel by 0216 GMT, surpassing the $60 mark for the first time since it began trading on the New York Mercantile Exchange in 1983. London Brent crude was up 59 cents at $58.95 a barrel, also a new record, noticed Reuters. Prices have soared as investors bet refiners and producers would struggle to meet peak winter demand in the world's biggest energy consumer. Speculators boosted their net long positions in US crude to nearly 20,000 lots last week, says Reuters.

Victor Shum, petroleum analyst at Texas-headquartered energy consultants Purvin & Gertz in Singapore, told AP, that "the psychology of the market is that once US$60 is breached, then there is tendency to test how much higher it can go, or how long US$60 can be sustained". According to Shum, "there's a lot of speculative activity", as "it is a red-hot market".

Naohiro Niimura, vice president at the derivative products division of Mizuho Corporate Bank, agrees to the point. "The market is testing higher to see what price levels this demand can endure," he was quoted by Reuters as saying.

Oil prices are more than 60 percent higher compared to a year ago, but would still have to surpass US$90 to breach the all-time, inflation-adjusted high set 25 years ago.

Much of the worry surrounding crude is demand-driven speculation, analysts say, and it primarily surrounds how much supply there is currently and how much spare there is in the event of a production glitch.

Meanwhile, OPEC president Sheikh Ahmed Fahd Al Ahmed Al Sabah said over the weekend he has begun consultations with fellow cartel members as to whether to release another half million barrels into the market, but added they would monitor prices further first.

OPEC raised its production quota by 500,000 barrels in mid-June, bringing the official output target to 28 million barrels a day. However, traders brushed off the move as insignificant as it would further deplete the cartel's razor-thin supply cushion and because its members were already pumping above the quota. Including Iraq, which is not bound by the quota, OPEC's production is close to 30 million barrels a day.

As Reuters believes, a new increase of 500,000 barrels per day (bpd) - an amount agreed by ministers in Vienna - may do little to soothe oil traders who say it's a shortage of refining capacity, not crude oil, that's driving prices higher.

Oil analysts, cited by Reuters, consider the presidential election in OPEC member Iran also important. The election was won by ultra-conservative Mahmoud Ahmadinejad, and it could have implications for the oil market as it heightens uncertainty in the world's fourth-largest producer.