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Friday, 9 February, 2001, 07:09 GMT
Oil climbs over $30 a barrel
Opec officials at a recent summit in Caracas, Venezuela
The impact of Opec's production cuts is starting to hurt
The benchmark price for the world oil markets, Brent crude oil, climbed to over $30 a barrel for the first time since early December on Thursday.

At the beginning of February, the oil cartel Opec reduced its production by 1.5 million barrels a day in order to reduce global supply.

The full impact of the cuts has led to the market being squeezed and the subsequent price rise.

The news comes at a time when oil companies are reporting record profits.

Lack of supply

Demand for oil, meanwhile, is going up. A cold snap in the central United States is driving demand for heating oil - which is derived from crude oil - to warm homes.

There has been a near-term shortage of crude oil

Clay Smith
Increased demand and Opec cuts coincide with fitful oil exports from Iraq, which have fallen below the 2.5 million barrels a day expected by the market.

In London, the Brent North Sea crude for March delivery peaked on Thursday at $30.12 a barrel, before easing off at the end of the day to close at $29.92 a barrel.

On Friday morning the price of oil slipped slightly off the $30 mark to rest at $29.60 a barrel.

More spikes ahead?

And the markets could move even higher on the back of news that Indonesia will propose a cumulative production cut of up to two million barrels a day at the next Opec meeting in March.

Last year, the average cost of a barrel of Brent oil was $28.5 - and peaked at just under $36 - dramatically higher than in previous years. Two years ago, one barrel had traded under $10.

Rising oil prices have led to grave concerns about growing inflation and recession, especially for developing countries which cannot afford to pay the higher price of importing oil to fuel local industries.

It also led to widespread consumer protests about the price of petrol at the pump last autumn.

And Thursday's news that oil major Shell has reaped bumper profits of 9 billion - primarily due to the high cost of crude oil - will add to the heated arguments over oil prices.

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See also:

24 Oct 00 | Business
Profits surge at oil companies
10 Oct 00 | Business
Oil demand warning
18 Oct 00 | Business
Only in the oil market...
08 Feb 01 | Business
Shell reports record 9bn profit
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