Forecast: oil prices to hit 70$ per barrel border

Oil prices climbed to a new record on Monday amid strong demand, worries about the nation's fuel supplies and security threats in Saudi Arabia.

After hitting $64 during trading Monday, the price of U.S. benchmark crude for September delivery closed at $63.94 a barrel, up $1.63 on the New York Mercantile Exchange. That eclipsed Friday's record high close of $62.31 a barrel.

Crude futures today briefly rallied even higher, to $64.27 a barrel, then edged back. Light, sweet crude on the New York Mercantile Exchange was down 6 cents this morning to $63.88.

"Setting a new record in oil is like a broken record - it keeps happening over and over again," said Phil Flynn, senior market analyst for Alaron Trading Corp. in Chicago. "I think we're on a path to hit $70 a barrel."

Flynn and others said Monday's price surge was triggered in part by plans to close temporarily the U.S. embassy in Saudi Arabia in response to what it said was a "threat against U.S. government buildings in the kingdom," reports Los Angeles Times.

According to Reuters, the United Nations' nuclear watchdog was to hold an emergency meeting in Vienna after OPEC's second biggest producer Iran restarted work at a uranium conversion plant, defying the European Union and running a risk of U.N. sanctions.

In the world's top exporter Saudi Arabia, U.S. missions were shut for a second day because of security concerns. Britain said militants were in the "final stages" of planning attacks.

"By far the biggest jolt to the markets has come from the geopolitical front," said Edward Meir, an analyst at Man Energy.

"We think that the bigger source of tension is emanating from the Iranian situation," he added in a report.

Despite the rampant oil price there is no sign yet of demand letting up. Worries that the world's biggest consumer the United States may run short of gasoline after a string of unexpected refinery closures has contributed to the price surge.

"Investors who were unduly negative about the prospects for the world economy at the start of the second quarter have been rapidly reappraising and revising their forecasts as we've moved through the third quarter," said Andrew Milligan, head of global strategy at fund manager Standard Life Investments.