Oil's record jump defies any single explanation

London: Oil's record jump to $139 a barrel at the end of last week defies any single explanation, although some leading analysts and producers predict the price could yet go higher.

Crude jumped $10.75 on Friday to $139.12, taking two-day gains to more than $16. Some put the move down to comments by an Israeli minister about a possible attack on Iran, the world's fourth-largest producer.

Others cited strong oil market fundamentals.

"There is a strong fundamental baseline to all of this," said Kevin Norrish, oil analyst at Barclays Capital. "On top of that, Iran has come back onto people's radar screens."

Iran's dispute with the West over Tehran's nuclear work had until last week faded in importance to oil investors, although the comments from Israel's transport minister Shaul Mofaz sparked a scramble to buy.

Banks such as Goldman Sachs and Barclays are prominent among those saying oil market fundamentals are a key factor in rising prices. Producers, including Organisation of Petroleum Exporting Countries (Opec), tend to blame factors other than supply, such as speculation.

Citigroup, in a note on Monday, said the broader themes behind oil's latest jump were probably disappointing growth in supply and robust world demand, and prices could rally even further.

World demand, while crimped by record prices, is still expected to rise by about 1 million barrels per day (bpd) this year, while supply from producers outside Opec is at risk of posting no growth, the bank said. "Until clear evidence emerges that demand is moving towards negative territory in absolute terms, a break of the bull run in oil is unlikely," the bank said.

For some, oil's jump last week defies explanation and is comparable to financial market bubbles of the past, such as the 1990s dot-com boom.

"If anyone tries to spin a rational explanation as to what transpired last Thursday and Friday in the energy complex, then just tune them out or better yet, punch them in the nose," analysts The Schork Report said.

Bullion: Gold at two-week high

Gold rose to its highest level since late May yesterday as the dollar hit a six-week low against the euro, fuelling buying of the precious metal as a currency hedge. Platinum also posted gains, rising to its highest level in almost two weeks as it tracked gold higher and amid supply concerns from major producer South Africa.

Spot gold touched a high of $908.70 an ounce, its strongest level since May 28, before slipping to 899.25/$890.45 at 1459 GMT from $896.80/$898.20 late in New York on Friday. Traders said a firmer dollar after above consensus home sales data in the United States briefly pushed prices to below Friday's levels.