US oil prices surged more than $1 to above $30 (€25.5) a barrel for the first time in six weeks yesterday as traders reacted to a stubborn deficit in US stockpiles and a potential output cut from OPEC.

US crude futures traded up $1.12 to $30.68 a barrel, their highest level since April 22nd. Benchmark Brent crude gained $1.05 to $27.37 a barrel, a two-month peak.

Oil prices have rallied more than 7 per cent since the middle of last week, when US government data showed crude oil inventories were stuck 12 per cent below last year's levels while gasoline tanks fell to a 6 per cent deficit.

This rapid rise in oil prices is likely to feed into higher petrol prices at the pump and higher prices for home heating oil if it is sustained for any length of time.

Coming in the week leading up to the start of the summer driving season, when US demand for motor fuel peaks, dealers feared a potential price increase.

"With global inventory still at extremely low levels and particular concern over low product and crude oil inventory in the US, there is little obvious sign of any significant weakness," said Barclays Capital analyst, Mr Kevin Norrish.

The US Energy Information Administration said gasoline demand in the week to May 23rd climbed to 9.3 million barrels per day (bpd), 600,000 bpd higher than a year ago. The bullish impact of the big stock deficit has been helped by signs the Organisation of the Petroleum Exporting Countries could be preparing to announce an output cut at a meeting next week, despite the fact that prices remain above its $25 target.

"Paradoxically, the price strength of the past couple of days (due to OPEC cut expectations) makes a production cut... less likely," Mr Norrish said.

"If OPEC does cut production it will be reacting to perceived weakness in market fundamentals later on this year."

Venezuela's Oil Minister Mr Rafael Ramirez said last week that the cartel might cut its ceiling by up to one million bpd at the June 11th meeting, but any decision hinges on the extent and speed of recovery of Iraq's battered oil industry.

Iraqi officials are targeting output of 1.5 million bpd by mid-June, about half its pre-war level. Exports should account for about half that, ministry expert Mr Shamkhi Faraj said.

"Very soon, in the few coming days, we will see the first Iraqi oil shipment to the international market," Thamir Ghadhban, the US-appointed director of the oil ministry, told reporters on Monday.

"We have already started contacts with foreign companies to conclude deals."