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Petrol Price Rises on the Cards As Oil Trades Near Highs

Posted on: Wednesday, 10 August 2005, 06:00 CDT

Oil prices held near their record high of $64 a barrel yesterday amid continued global uncertainty, threatening to push petrol prices higher.

The cost of crude set a fresh record of $64.27 a barrel earlier in the day as traders worried that a nuclear stand-off with Iran and the threat of terrorist attacks in Saudi Arabia could disrupt crucial Middle East oil exports. Concerns over refinery outages in the US also continued to weigh on markets.

The US embassy and two consulates in Saudi Arabia, the world's largest oil producer, remained closed for a second day while Britain and Australia warned of an increased threat of terrorist attacks in the country.

Edward Meir, an analyst at the brokerage Man Energy, said: 'By far the biggest jolt to the markets has come from the geopolitical front. We think the bigger source of tension is emerging from the Iranian situation.'

Britain, France and Germany called an emergency meeting of the United Nations nuclear watchdog in Vienna yesterday after Iran, Opec's second- biggest oil producer, restarted work at a uranium conversion plant, defying the EU which has warned of UN sanctions.

Oil prices have risen by more than $20 a barrel since the start of the year, hitting British consumers' pockets. The increase has translated into a jump of more than 10p a litre for unleaded petrol to an average of 90p across Britain, according to the Automobile Association. It said petrol prices have already jumped above pounds 1 in some areas. A rise in oil prices of $2 to $3 a barrel means an extra penny on petrol at the pump.

The surge in oil prices has also hit British manufacturers hard as their raw materials costs surged at the fastest annual rate in more than 20 years last month.

Despite the surge in the oil price, there is no sign of a let-up in demand from the US and rapidly growing emerging market economies such as China. Prices have also been driven higher by worries that recent US refinery shutdowns " a dozen in the past few weeks " could significantly hurt supply. Barclays Capital estimates the outages affect 3 per cent of US refining capacity. Experts say a severe hurricane season could knock out yet more supply.

Opec's president, Sheikh Ahmad al-Fahd al-Sabah of Kuwait, said yesterday it was pumping enough crude to ensure stocks are building above five- year average levels and could make more oil available if required.

Source: Independent, The; London (UK)

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