September 20, 2007 / 3:46 AM / 10 years ago

Oil hits high over $84

<p>A Basra oil refinery is show in this undated file photo. Reuters/Zohra Bensemra</p>

NEW YORK (Reuters) - Oil surged to $84 a barrel on Thursday in the seventh straight record-breaking session as companies shut Gulf of Mexico output on forecasts a tropical depression churning through the region would become a storm.

U.S. crude settled up $1.39 at $83.32 a barrel after touching an all time high of $84.10 earlier. London Brent settled up 62 cents at $79.09 a barrel.

Oil has traded above $80 for the past week in part due to concerns about U.S. supplies after government data showed crude stocks in the top consumer fell for the fourth straight week.

A tropical depression blowing into the Gulf of Mexico exacerbated worries as companies shut offshore oil and natural gas output on expectations it would become a tropical storm.

Energy companies have shut over 360,100 barrels of oil per day, some 27.7 percent, of Gulf crude oil production and 16.7 percent of natural gas production on the storm threat, the U.S. Minerals Management Service said on Thursday.

“Energy companies shutting down Gulf of Mexico production and Fed Chief Bernanke’s optimistic words on the economy were supportive for this latest record rise in crude futures,” said Phil Flynn, analyst at Alaron Trading in Chicago.

RISING PRICES

<p>An oil well is seen at dawn near Fort Lupton, Colorado, July 12, 2006.REUTERS/Rick Wilking</p>

U.S. Federal Reserve chief Ben Bernanke said he expected rising defaults on U.S. mortgages but added the Fed was committed to preventing new lending problems after cutting interest rates sharply on Tuesday.

The dollar fell to a lifetime low against the euro and reached parity with the Canadian currency on Thursday on expectations more interest rate cuts could be made.

Oil has risen by a third this year, driven by worries of fuel shortages during the Northern Hemisphere winter, supply risks in producer countries, the weaker dollar and rising money flows from investors.

The recent surge to record prices came after producer group OPEC agreed to add 500,000 barrels per day (bpd) to global markets to help calm consumer nation concerns.

While analysts are divided over whether prices can sustain current levels, some OPEC officials said oil will not stay above $80 for long.

“This situation is not stable and cannot be permanent,” said Hossein Kazempour Ardebili, Iran’s OPEC governor.

Wednesday’s rise to record highs came after data showed crude oil stocks in the United States fell by 3.8 million barrels last week, nearly twice the 2 million-barrel draw expected in a Reuters poll of analysts.

Additional reporting by Annika Breidthardt in Singapore and Peg Mackey in London

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