Oil prices rose for the second straight day Tuesday with futures prices in New York closing at $61.80 per barrel.
Oil closed just below the record high of over $62 reached during mid-day trading Monday. Traders say there is continuing worry about the stability of the supply of middle eastern crude in the aftermath of the death of Saudi King Fahd. His death on Monday sparked the latest rise in prices, even though his successor, Crown Prince Abdullah, is not expected to change the country's oil or foreign policy. Saudi Arabia, with the world's largest oil reserves, has assured buyers that there will be no decline in Saudi production.
Oil traders point to other factors that are keeping prices high. These include refinery problems and record energy usage in the United States, boosted by an economy that is expanding by over three percent annually. In addition, oil demand has soared in China and India, where economic growth exceeds eight percent.
Bruce Kasman of JP Morgan Securities tells Bloomberg News that he also expects rising oil demand from Japan, whose long dormant economy is beginning to grow.
"If we look at what we call the axis of vigor - China, the United States and Japan - over the past year they've all been part of significant demand growth. That's one reason that oil has been firm. We're not expecting oil to go up significantly from here," Mr. Kasman says. "But I think it is a world in which oil prices stay firm."
Oil prices have risen 41 percent in the past 12 months and have more than doubled in the past two years. Analysts are generally surprised that the pace of economic activity in America and Asia has continued at a high pace despite the higher gasoline prices that have been eroding personal income.