Oil prices surged to a new high of $68 a barrel on concerns about a storm that could hit production sites in the Gulf of Mexico and a government report that showed a decline in the nation’s gasoline supply.

Natural gas futures also rallied yesterday on the storm fears – even though forecasters anticipate a weak hurricane – as traders recalled the months-long disruption to oil and gas production in the region following last year’s Hurricane Ivan.

“The fear of a replication of that is going to keep the market on its toes and we could easily test $70 a barrel,” an analyst at Refco Group, Marshall Steeves, said.

Crude rose to $68 per barrel in electronic trading early today in Asia, before retreating to $67.76, a gain of 44 cents from yesterday’s settlement price in New York. Earlier, crude oil for October delivery settled at $67.32, an increase of $1.61 in floor trading on the New York Mercantile Exchange, topping the front month contract’s previous closing high of $66.86, set August 12.

On an inflation-adjusted basis, oil prices would need to hit about $90 a barrel to match the highs of 25 years ago.

September natural gas futures climbed 30.1 cents to $9.984 per 1,000 cubic feet. The contract had surged as high as $10.128 per 1,000 cubic feet in overnight electronic trade.

Brokers said supplies of oil, natural gas, gasoline, and other products are adequate for this time of year, explaining that the seemingly unending rally on energy markets is more a reflection of fears about unexpected supply disruptions at a time when demand is strong.

With global demand averaging some 84 million barrels a day this year, the world has scant excess production capacity – about 1.5 million barrels – to offset any lost output.

“A lot of this is ‘just in case’ buying,” an oil broker at Fimat USA in New York, Mike Fitzpatrick, said.

The amount of natural gas in storage in America stands at 2.52 trillion cubic feet, according to the Energy Department. That is about 0.2% below year ago levels.

“I don’t see a big problem,” Mr. Fitzpatrick said.

In its weekly petroleum supply report, the Energy Department said domestic inventories of gasoline fell by 3.2 million barrels last week to 194.9 million barrels, or 7% below year ago levels.

American supplies of crude oil grew by 1.8 million barrels to 322.9 million barrels, or 13% above year ago levels, the agency said. The supply of distillate fuel, which includes heating oil and diesel, increased by 1.4 million barrels to 132.5 million barrels, or 4% above last year’s level.

The mixed picture did little to calm nerves on energy markets.

“The inventories have built a little bit, but that doesn’t mean an outage somewhere doesn’t cause price spikes,” an oil broker at BNP Paribas Commodity Futures in New York, Tom Bentz said.

Nymex gasoline futures jumped 6.2 cents to $1.92 per gallon, while heating oil futures gained 6.78 cents to $1.9258 per gallon. Retail gasoline prices are averaging $2.61 a gallon nationwide, an all-time high and 73 cents higher than last year, even as demand continues to rise, according to government statistics.

But with the summer driving season drawing to an end, market focus is expected to shift to heating oil and natural gas as demand for these products peak in the winter.

Stoking bullish sentiment yesterday was Tropical Storm Katrina, which formed in the Bahamas and could reach hurricane strength before hitting the coast of Florida later this week. The National Hurricane Center said the storm is expected to cross the state and head into the Gulf of Mexico, dropping a foot or more of rain. While jitters about Katrina’s strength and path were the predominant force on energy markets yesterday, some analysts said the storm worries may be overblown.