Fears of an oil shock deepened yesterday as crude set new highs, underpinned by fresh evidence of strong Chinese demand and worries about sabotage in Iraq.
News of an explosion at a refinery in the United States pushed US light crude to a record $46.30 a barrel on the New York Mercantile Exchange, before it eased to $46.05, up 55 US cents.
London Brent set a record $43.40 a barrel, trading later at $43.13, up 84 cents. Prices have hit new records in all but one of the last 11 trading sessions.
Worries about possible unrest in oil producer Venezuela during this weekend's referendum on the rule of president Hugo Chavez helped fuel the gains.
"None of the fears about supply have gone away and demand growth shows no sign of slowing," said independent London oil analyst Mr Geoff Pyne.
"You've got Iraq along with the referendum in Venezuela on Sunday," said Mr Nauman Barakat of brokers Refco in New York. "It's one problem after the other. I don't see anything bearish in this market."
Oil is up more than $10 a barrel since the start of the year. In real terms, adjusted for inflation, prices are still far below 1980s peak of $80 a barrel, which followed the Iranian revolution. But prices now are near those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
While leading economies so far have managed to cope with higher oil prices, signs are emerging that rising energy costs are starting to bite.
The chief economist of Germany's central bank said oil was dampening Germany's economic outlook and persistently high prices could force a downgrade in the bank's upbeat forecasts for growth and inflation.
An explosion at the 420,000-barrel-a-day BP Whiting refinery in Indiana , the third biggest in the United States, underlined the fragility of a US refinery system that is struggling to meet national consumption growth rates of 3.5 per cent.
China on Friday said crude imports into the world's second biggest consumer held strong in July at growth rate of 40 per cent over July 2003.
