Crude oil prices are trading near $76 a barrel and topped $78 on Monday, within sight of the record high hit in August 2006 of $78.65.
Real and threatened disruptions to crude oil supplies, constraints at refineries in consuming countries, resilient global fuel demand and a flow of investor money into oil and other commodities have pushed prices higher.
Investment flows from pension and hedge funds into commodities including oil have resumed in recent months after a hiatus earlier in the year due to concerns about how the global economy was moving.
Investors are also increasing bets that prices will rise.
Speculators in the New York Mercantile Exchange crude oil market boosted net long positions to a record high in the week to July 10, the Commodity Futures Trading Commission said.
Speculative trading in energy markets has surged in recent years as investors sought to beat returns in other markets such as equities and bonds
LESS OPEC OIL
The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, is pumping less than in 2006 after agreeing to remove barrels from the market.
OPEC agreed to curb supply by 1.7 million bpd, or about 6 percent, last year in two steps. The second stage took effect from February 1.
Members have made about 1 million bpd of the pledged reduction, according to Reuters estimates. The exporter group is next scheduled to meet in September to decide production policy.
Consumer nations have called on OPEC to pump more crude to help ease prices, but the group's oil ministers insist crude supplies are adequate.
While previous price spikes have been triggered by supply disruptions, demand from nations such as China and the United States is a main driver of the current rally.
Global demand growth has slowed after a surge in 2004, but it is still rising and higher prices have so far had a very limited effect on economic growth.
Analysts say the world is coping well with high nominal prices because adjusted for exchange rates and inflation, they are lower than during previous price spikes and some economies have become less energy intensive.
Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.
Oil companies have detailed about 547,000 barrels per day of shut Nigerian production due to militant attacks and sabotage. The amount represents about 18 percent of the West African country's output capacity of around 3 million bpd.
Adding to concern about tight supply of unrefined crude is a global shortage of refining capacity.
Refiners in the United States, the world's top gas guzzler, have struggled with unexpected outages this year which drained inventories ahead of the summer, when motor fuel demand peaks.
U.S. gasoline inventories stand at 205.6 million barrels, 8.2 million below a year ago, according to government data. Demand is still growing, despite higher prices.
Refining capacity is already tight after years of underinvestment.
The U.S. oil industry took a battering in 2005's Atlantic hurricane season. Some forecasters expect an active storm season this year.
Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear program.
Western governments suspect Iran is using its civilian nuclear program as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.
Iraq is struggling to get its oil industry back on its feet. Exports are stagnating at around 1.5 million bpd, compared with 1.7 million bpd or more under Saddam Hussein.
Decades of wars, sanctions and underinvestment have left Iraq struggling to pump its oil out of the ground and on to world markets. Production has failed to meet optimistic projections by oil ministry officials.
Iraq is also unable to ship crude regularly from its northern fields for export from the Turkish port of Ceyhan because of attacks on the pipeline to Turkey.