New York's main contract, light sweet crude for delivery in September, closed up 90 cents at 75.89 dollars per barrel, after touching a high of 76.50 dollars, last seen on July 18.

In London, Brent North Sea crude for September delivery settled up one dollar at 76.89 dollars per barrel, after earlier hitting 77.47 dollars -- also its highest level since July 18.

"The energy market has become a powder keg because of its role as a geopolitical barometer," said Fimat analyst John Kilduff.

"Just to add to the mix of supportive developments, tropical storm Chris could become a more significant event towards the end of the week," he warned.

The storm could strengthen into the season's first hurricane Wednesday as it moves north of Puerto Rico on the western edge of the Atlantic, the US National Hurricane Center said.

Last year, energy facilities in the rig-heavy Gulf of Mexico were ravaged by hurricanes, pushing oil prices to then-record high points.

Chris is the third Atlantic storm since last year's record-smashing season of 28 named storms, including 15 that became hurricanes.

Crude futures are now soaring close to record peaks hit last month as violence erupted between Israel and Lebanon. Brent spiked to 78.18 dollars per barrel on July 17, while New York crude hit 78.40 dollars on July 14.

Traders also mulled over the latest weekly inventories report from the US Department of Energy.

The DoE said that US crude oil inventories fell 1.8 million barrels to 333.7 million barrels in the week to July 28, compared with analysts' forecasts of a drop of 875,000 barrels.

Gasoline stocks dropped by 100,000 barrels last week to 210.9 million, the report showed, compared to predictions for a much larger drop of 1.8 million barrels.

Violence in the Middle East continued to support high prices as heavy fighting between Israeli forces and Hezbollah guerrillas raged in Lebanon.

"Little progress is being made toward a ceasefire and Iran continues to insist on its right to produce nuclear fuel despite Monday's (UN) Security Council vote that it suspend nuclear activities by August 31 or face sanctions," observed Barclays Capital analyst Kevin Norrish.

In Iran, supreme leader Ayatollah Ali Khamenei called on Muslims everywhere to resist US and Israeli "aggression" as his country faced a UN deadline to halt uranium enrichment or have sanctions imposed.

In the event of sanctions, security analysts have suggested that Iran might retaliate and block the Strait of Hormuz, which is a crucial transport route for oil shipments to Japan, the United States and Western Europe. Related Links
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