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Last Updated: Wednesday, 28 July, 2004, 19:32 GMT 20:32 UK
Oil prices surge to record high
Oil tanker
World oil demand has been increasing
US oil prices closed at record highs as investors fretted about the impact of the crisis at Russian oil giant Yukos.

Light sweet crude surged $1.06 to a record finish of $42.90, having earlier reached an all time high of $43.05 during the day's trade.

In the UK Brent crude settled up 99 cents at $39.53 a barrel, after hitting $39.68, its highest level since October 1990, ahead of the first Gulf War.

The surge came as bailiffs told Yukos to stop sales, triggering supply fears.

Russia is the world's second biggest oil exporter after Saudi Arabia and Yukos accounts for 20% of the country's oil output.

Sales ban

According to news agencies, the Russian justice ministry has told Yukos to stop selling property - an effective ban on oil sales.

If Yukos has to halt production, up to 1.7 million barrels a day could be affected.

That crisis teamed with the lack of a supply cushion in the Middle East in the event of an attack on oil infrastructure there has encouraged heavy buying from big-money speculative funds, pushing oil prices ever higher.

Production from the Opec cartel of oil-producing countries is already at its highest level since 1979 - 30 million barrels a day - to meet huge consumption growth in China and the US.

It is also pressing ahead with a renewed increase in capacity in August.

Output fears

The move has threatened further strain on tight international supplies.

If the problems at Yukos prevent Russian production from meeting forecasts of further growth, pressure on the global oil supply system would intensify, leaving it even more pressed to meet rising demand, analysts have said.

On Tuesday, Venezuela's oil minister said Opec had little spare capacity to help lower high oil prices.

"A cut is not foreseen, and most of the countries are near their production limits," Rafael Ramirez told Reuters news agency.

The gains in prices came despite figures from the US Energy Information Agency, which showed stockpiles building back to average levels.

The BBC's Hugh Pym
"Yukos has been told to halt sales of oil until it pays its tax bill"

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