Oil prices struck a fresh record above $48 (€ 38.70) a barrel yesterday, spurred higher by renewed violence in Iraq and fresh evidence that strong demand growth in China and India has not yet been slowed by higher energy costs.
US light crude on the New York Mercantile Exchange rose 93 cents to $48.20 a barrel, a new record, and London Brent gained 67 cents to $43.70 a barrel. US prices have set record peaks in all but one of the past 15 trading sessions and are up nearly $11 a barrel, 29 per cent, since the end of June.
Rising oil demand has left little spare capacity in the system to cope with outages in Iraq where Shi'ite militia have said they will target oil infrastructure if US forces do not leave the holy city of Najaf.
Fierce fighting raged in Najaf yesterday after rebel Shi'ite cleric Moqtada al-Sadr defied an Iraqi government threat to attack his stronghold in a holy shrine and rejected demands that he end his latest uprising.
Iraq's main southern pipeline from the Basra oilfields has been shut since a sabotage attack on August 9th, curbing export flows to about a million barrels daily - half normal rates - through a secondary line.
Iraq's oil minister said that exports would not be restored until the security situation improved.
"Once things return to normal \, will be back to normal," Thamir al-Ghadhban said.
Demand growth in emerging economies China and India has shaken up the oil market this year, intensifying competition for supply with established consuming giants such as the United States.
"The market is currently slightly higher than it should be, but I do expect to see $50 a barrel on NYMEX crude oil by the fourth quarter," said Mr Benoit de Vitry, global head of commodities for Barclays Capital.
China's refineries have processed 17.2 per cent more crude so far this year than in 2003, the country's state statistical bureau said yesterday.
Crude imports to end-July have soared nearly 40 per cent from last year.
India's biggest refiner, state-run Indian Oil Corp Ltd (IOC), said it expected India's crude oil imports to rise by 11 percent in 2004/05 as demand rises by nearly 4 per cent.
In the US, which guzzles around a quarter of the world's oil, demand so far this year is up 3.4 per cent, stopping inventories building much as rising consumption absorbs extra imports from OPEC producers such Saudi Arabia.
US government data for the week yesterday showed commercial crude oil supplies had fallen 1.3 million barrels to 293 million barrels last week, the third straight week of declines. - (Financial Times Service)
