The North American oil benchmark price closed above $102 US a barrel Wednesday and gold reached record highs amid continuing unrest in Libya.

April oil in New York closed up $2.60, to $102.23 a barrel US.

The April contract for the European and Asian benchmark — Brent — rose 75 cents to $116.17 a barrel, on the ICE Futures exchange in London. On Tuesday, it was up $3.62, to $115.42, its highest since Aug. 27, 2008.

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Gold hit a record $1,439 an ounce on Wednesday. (Enny Nuraheni/Reuters)

Oil prices have been volatile recently, up 13 per cent since Feb. 18, as fighting between supporters and opponents of Moammar Gadhafi has cut oil production in the OPEC nation in half.

"I think the trend is still going to be higher," said Norman Raschkowan, North American strategist at Mackenzie Financial Corp. "I'm still constructive in terms of the prospects, barring a real sort of external shock to the system, like a disruption to the physical flow of oil coming out of Saudi Arabia."

Investors are concerned that violent protests and political upheaval might break out in the rest of the region, since more than 60 per cent of the world's proven oil reserves are in Iran, Iraq, the United Arab Emirates, Kuwait, Bahrain, Qatar, Oman and Saudi Arabia.

Crude supplies unexpectedly dropped

Also supporting higher crude was a report from the U.S. Energy Department, which showed American crude supplies unexpectedly dropped by 364,000 barrels last week, suggesting demand may be improving.

Gasoline heads higher

The rise in crude is driving prices at the gas pump higher. Michael Ervin of energy consulting firm Kent Marketing Services said Tuesday that the wholesale price of gasoline in Canada is up about a nickel per litre from a week ago.

"When it goes up that amount, retailers have no choice but to pass that along pretty quickly because in many cases the retail margin is only in the order of five or seven cents per litre," Ervin said. 

He noted that as the weather improves and people drive more, the retail prices will rise further if crude stays high. 

"That hasn't kicked in yet. We're just seeing, fundamentally, changes at the crude level driving the wholesale price," Ervin said.

The average price at the pump for unleaded in Canada was $1.206 per litre on Tuesday, up from $1.152 per litre the previous week, according to Kent Marketing Services.

Gold moved farther into record territory as investors looked for a safe haven as the U.S. dollar fell.

Bullion reached its highest ever nominal price of $1,439.60 an ounce, but the April contract gave up some of that, closing at  $1,437.70 US an ounce, up $6.50.

The Canadian dollar closed up .27 of a cent, at 102.84 cents US.

Analysts have observed that, historically, the loonie's benefit from higher oil has dissipated after crossing the $100 threshold, when investors start worrying about the economic damage that can result from a prolonged spike in crude prices.

Analysts are concerned the rebellion in Libya will endanger the oil fields, which produce 1.6 million barrels per day. That's only about two per cent of global demand, but experts say the disruption puts pressure on world supplies when demand is picking up.

A Libyan oil minister says production in the east has declined 50 per cent during the uprising, though international observers estimate much more has been put on hold.

The chair of Libya's national oil company warned that $130-a-barrel oil could come as early as next week if the troubles persist. And Gadhafi himself threatened that Libya will replace Western banks, oil firms and companies with others from China, India, Russia and Brazil.

The International Energy Agency said Wednesday that between 850,000 and one million barrels per day have been shut in. That's up from the agency's previous estimate of between 500,000 and 750,000 barrels a day.

'This could get really messy.'—Helima Croft, Barclays Capital oil analyst  

Whatever the number, not much will be moving out of Libya, analysts said. Oil tankers that have made it to Libyan ports may simply be taking on whatever excess supplies have been available since the uprising started, said Houston-based oil analyst Andrew Lipow.

With nobody in clear control of the country, Libyan oil fields probably will be in danger for months, added Barclays Capital analyst Helima Croft.

"They have a highly fractured army, so you could see security problems persisting for weeks or months," Croft said. "This could get really messy."

With files from The Canadian Press and The Associated Press