Oil prices vaulted to new highs yesterday on worries that financial turmoil at Russia's largest oil company could cut into exports from the number two supplier nation, with OPEC already struggling vainly to cool the red hot market.
Oil futures in New York surged 90 cents to $42.65 a barrel, the highest level since the futures contract began trading in 1983, before easing back by afternoon. In London, Brent crude oil rose 50 cents to $39.75 a barrel.
The gains come amid heightened concern over production from Russian oil giant Yukos, embattled by a huge tax bill. Oil prices were already on the rise due to fears of terror attacks on Middle East oil infrastructure, sparking worries over inflation in energy consumer nations.
"Yukos's financial problems will get worse in the coming weeks and the market is very nervous that we will see some of its 1.7 million barrels a day shut in for some period," said Steve Turner, an oil analyst at Commerzbank Securities.
Yukos has said the company could collapse by mid-August because of a freeze on its bank accounts and assets, adding that its rail shipments of oil, which make up a quarter of its total sales, could be affected soon. Yukos, whose former CEO Mikhail Khodorkovsky is on trial for tax evasion and fraud, pumps a fifth of Russian oil.
Oil dealers have said any disruption to exports from Russia would stretch already tight global stockpiles and leave producer group OPEC with little or no power to counter a supply squeeze.
OPEC, which has been trying to bring prices down for months, is pumping at more than 95 percent of capacity, the highest for a quarter of a century, giving it little room for manoeuvre in an emergency.
Democratic presidential nominee John Kerry said on Thursday America, the world's largest oil consumer, should rely on "its own ingenuity and innovation - not the Saudi royal family" for its energy needs.
The Democratic party's platform adopted by the convention this week calls for the United States to develop crude supplies from non-OPEC countries like Russia, Canada and nations in Africa.
It also repeated Democratic attacks that President George W. Bush is beholden to oil companies.
Oil staged its first assault on historic highs on Wednesday after news that Yukos might face a ban on oil sales while courts tried to enforce their multi-billion-dollar tax debt
However, prices retreated a shade after Thursday's reprieve by the justice ministry allowed the company to keep pumping.
Russian bailiffs yesterday gave Yukos a month to pay its tax debt.
