Crude Shock: Oil Prices Top $50

Crude oil topped $50 per barrel during Asian trading on Tuesday, pushing past the psychological milestone for the first time then surging further to new record levels likely to unsettle oil-consuming nations.

Traders bid oil to new highs in after-hours trading on the New York Mercantile Exchange in a reaction to the slow recovery of U.S. oil production that was damaged by Hurricane Ivan and unrest in key producers Saudi Arabia, Iraq and Nigeria.

After reaching $50, prices inched higher. By mid-afternoon in Asia, light sweet crude oil for delivery in November traded at $50.47 per barrel, up 83 cents from the close of Monday's regular session in New York.

"We're in brand new territory now, so how high it goes is really difficult to predict," said Tokyo oil trader Tony Noonan.

Saudi Arabia, the world's largest oil exporter, will raise production from 9.5 million barrels a day to 11 million barrels, an Oil Ministry official said Tuesday, in an attempt to rein in prices that topped $50 a barrel for the first time.

Oil prices spiked despite assurances from OPEC's president that producing nations were seeking ways to calm markets after an announcement that the cartel would boost production by 1 million barrels a day failed to move the price lower.

"We found out something today we didn't know: We've lost 200,000 barrels a day of Nigerian production," senior energy economist Deborah White of Societé Generale, France's third-largest bank, told CBS News Correspondent Steve Holt.

Rebels in Nigeria continue to battle for control over the vast southern oil fields in the world's seventh-largest exporter.

Another factor was the shutdown of refineries in the Gulf of Mexico because of Hurricane Ivan.

"The market is behind in producing product for this winter's demand," said White. "Basically, the refinery shutdowns — those are losses that can never be made up."

The United States has lost more than 11 million barrels of oil production in the past two weeks, according to U.S. government data, with Gulf of Mexico output still down nearly 500,000 barrels a day following the devastation brought by Ivan.

The price of oil is up roughly 75 percent from a year ago and some analysts predict the latest surge — which is already hurting airlines and other big consumers — could lead to a global recession.

Although oil is at an all-time high, prices are not at record levels when inflation is taken into account. Adjusting for inflation, today's prices are still more than $30 below the level reached in 1981 after the Iranian revolution.

That hasn't eased the fears gripping the market, however.

"There is a lot of fundamental, panic buying by the end users," said oil strategist Ng Weng Hoong at Energyasia.com in Singapore, adding that he believed the price would go still higher. "When they cracked $50, now there is a trigger for $60. It broke the barrier, it's going to reach the next target," he said.

With global oil demand at roughly 82 million barrels a day, analysts say the amount of excess oil production available is only about 1 percent, leaving the industry a slim margin for error in the event of a prolonged supply interruption.

Purnomo Yusgiantoro of the Organization of Petroleum Exporting Countries said Tuesday that producers are trying to bring prices down, but the group thinks supply is not the problem because it has at least 1.5 million barrels a day of spare capacity.

"It's a market totally out of OPEC's control," said Societé Generale's White.

On Monday, the U.S. Minerals Management Service reported that daily oil production in the Gulf of Mexico is 29 percent below normal at about 1.2 million barrels per day.

Eleven million barrels of oil, or 1.9 percent of annual production in the Gulf of Mexico, have been lost since Sept. 13, when offshore producers began evacuating crews and shutting down production ahead of Ivan's arrival.

In Iraq, fighting between U.S.-led forces and rebels has shown no sign of letting up ahead of the country's elections in January.

Adjusted for inflation, though, oil prices aren't as high as they were 25 years ago.

"Memories are short, and prices are much higher than people remember them being," said White. "It's not that we can't afford to pay these prices, but the psychological shock when any commodity rallies is very great."