Oil prices briefly surge above $42

WASHINGTON ‹ Crude oil surged above $42 a barrel Tuesday as concerns about supplies, terrorism and strong demand weighed on the market.

Futures rose as high as $42.25 Tuesday morning, but by midday light crude for September delivery had retreated somewhat, trading at $41.95, or 51 cents higher.

"The big thing is the fact that OPEC is so close to (producing at) full capacity," said Tom Bentz, a trader at BNP Paribas Futures in New York.

Oil analysts estimate that the world has roughly 1 million barrels in spare capacity remaining, leaving little room in the event of a supply disruption.

The Organization of Petroleum Exporting Countries, which pumps more than a third of the world's supply, has said it would boost its production ceiling of 25.5 million barrels a day by 500,000 barrels next month.

Other factors, Bentz said, include worries in the United States about heating oil supplies for the upcoming winter and the possibility that U.S. gasoline inventories, while adequate now, will be drawn down significantly in August.

The price of oil settled at a high in the United States of $42.33 on June 1. Since then, it has fallen as low as $35.66.