Supply worries push oil to record

The surge in oil prices is raising more than just eyebrows

Oil prices have continued their record-breaking run on Wednesday, busting through the $47-mark amid concerns that demand will outstrip supply.

US light crude hit $47.03 in New York, taking gains for this year to more than 44%. Brent crude also rose in London, touching $43.22 a barrel.

A main worry is that output is close to its limit and any disruption to supply would prove difficult to smooth out.

At the same time, an economic recovery is boosting the world's thirst for oil.

Emerging economies are proving the most difficult to satisfy, with Chinese imports of crude oil jumping 40% in the first seven months of 2004 from a year earlier.

Some analysts are predicting that oil prices will advance above $50, while governments and firms are already warning of the damage that higher raw material and fuel costs are likely to do.

Flash points

Investors have become increasingly nervous in recent weeks and have identified a number of trouble spots that could provide an unwelcome boost to oil prices.

Why are oil prices so high?

In Iraq, supporters of the Shia cleric Moqtada Sadr on Wednesday issued fresh threats of sabotage against the country's oil pipelines.

The long-running saga between the Russian government and oil giant Yukos, and possible unrest in Venezuela also are providing traders with plenty of jumpy moments.

"Any significant capacity is seen as unreliable -- Iraq, Russia and Venezuela for instance," said David Thurtell, a commodities strategist at Commonwealth Bank of Australia.

"Ongoing violence in Iraq is reinforcing the mood," he added.

Repercussions

The Opec group of oil exporting countries tried to play down the threat posed by high oil prices on Wednesday, adding that it had boosted production in July by 599,000 barrels to 29.57 million barrels per day.

"The direct contribution of the concern-driven rise in oil prices to the economic slowdown in 2004 has been very small," the oil cartel said in its monthly statement.

However, it warned that high oil prices could cause problems next year.

"Going forward much will depend on how long the price of the Opec reference basket remains above $35," the group said.

"The effect would be greater in 2005. The impact on the developing world would be greatest in the large trading economies of South East Asia."