Oil prices ended at fresh record highs yesterday as US-led forces sought to crush a rebellion in the holy Iraqi city of Najaf, a move which Shi'ite Iraqi militia have warned could trigger fresh attacks on oil infrastructure.
US light crude traded up to $45.75 (€37.37) a barrel, the highest price in 21 years of trade on the New York Mercantile Exchange, before settling 70 cents higher at $45.50. London's Brent crude futures peaked at $42.56 and settled 72 cents higher at $42.29.
Iraq's oil exports have run at half normal levels for the last four days as an uprising by an anti-US cleric threatens infrastructure in southern production centres.
US marines launched a major offensive in Najaf yesterday to root out militiamen loyal to Shi'ite Muslim cleric Moqtada al-Sadr. Sadr's militia has threatened to blow up oil pipelines if US forces storm Najaf.
A late Monday pipeline sabotage attack has already cut loadings from Iraq's two offshore Gulf terminals - which account for all the country's exports - to 960,000 barrels per day compared with 1.9 million normally.
Iraqi officials said they had reopened the pipelines and would resume full expors late yesterday.
Fears that tightly stretched supplies have left little leeway for any disruptions have added 19 per cent, or $7, to a barrel of crude oil since the end of June.
"The most immediate concern remains Iraq, where the prospect of further severe political and economic setbacks appears to be increasing," said Mr Paul Horsnell of Barclays Capital bank.
A hefty and unexpected drop in US crude inventories on Wednesday has added to concerns that supply may not be able to keep pace with demand, which is growing at the fastest rate in 24 years. US crude inventories fell by 4.3 million barrels to 294.3 million last week, the US government said.
