Tanks at the Saudi Aramco oil facility in Dammam city, 450 kms east of Riyadh. When Ali Naimi, Saudi oil minister, said last week that the kingdom was pumping more than 10 million barrels a day, prices barely moved a few cents.HASSAN AMMAR
Oil surged nearly 5 per cent on Thursday to its highest level since crude's record run in 2008 after a late report out of Iran of a pipeline fire in top exporter Saudi Arabia.
The Iranian media reported an explosion on an unknown oil pipeline in the oil-rich Easter Province of Saudi Arabia, although it was not possible to verify the report immediately. .
Prices edged off highs after the Dow Jones newswires reported a Saudi oil official said the report was untrue, according to CNBC television.
Markets have been on edge this year as threats of a supply disruption due to the West's standoff with Tehran over Iran's nuclear program have added to concerns about actual production losses from South Sudan, Yemen, Syrian and the North Sea.
"The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.
Brent crude prices topped $128 a barrel in late post-settlement trade, levels not reached since July 2008 when the growing economic crisis sent oil spiralling to record peaks of more than $147 a barrel.
Prices were already up before the pipeline report, lifted by news Israel would test-fire a ballistic interceptor missile, excalating tensions over the crisis that has included tough sanctions against Iran.
International benchmark Brent crude climbed to $128.40 a barrel in post-settlment trade, after settling at $126.20, up $3.54 on the day.
U.S. April crude settled at $108.84 a barrel, up $1.77, before rising to $110.55 in late activity, the highest since May 2011.
Iran, the world's fifth largest oil producer, has been struggling to sell its crude in the face of tightening U.S. sanctions and an EU embargo that kicks in on July 1. This has threatened to tighten global crude supplies.
However, U.S. Energy Secretary Steven Chu said that global oil producers have enough spare production capacity to make up for a drop in Iranian exports.
U.S. President Obama said his administration will lay out as "many steps as we can" in coming weeks to unclog bottlenecks in the world's top consumer that are helping to push up the price of gasoline and other fuels, a key issue for consumers as the economy struggles to recovery in an election year.
Data showing U.S. jobless claims fell last week -- the latest sign that the labor market recovery was gaining momentum -- also helped support prices.