Oil prices reach new record highs

Renewed unrest in Iraq has spooked the oil market

Global oil prices rose to new record highs on Monday following fresh outbreaks of violence across Iraq.

After the Iraqi militant cleric Moqtada Sadr rejected calls for an end to the fighting, the price of US light crude ended the day up 89 cents to $44.84.

That is even higher than the previous 21-year high of $44.77 on Friday.

In London, Brent crude closed up 93 cents to $41.56, also a new high, amid fears that militants may launch fresh attacks on Iraq's oil facilities.

Insurgents have sabotaged refineries and pipelines during previous bouts of unrest, disrupting oil supplies from a country which controls the second biggest proven oil reserves in the world after Saudi Arabia.

Sporadic fighting has been erupting around the holy city of Najaf for the past five days.

Followers of Mr Sadr have also taken to the streets of Basra in southern Iraq, where some 150 militants walked around the city with guns and grenade launchers on Monday.

A British soldier was later killed in the city.

Shutdown

Iraqi officials said on Monday they had stopped pumping oil from key southern oilfields because of violence in the region.

A Southern Oil Company official said militants loyal to Mr Sadr had threatened to target oil installations in the city of Basra.

An Iraqi oil ministry spokesman could not confirm the shutdown, but said any attacks on the oil industry would only harm the interests of the Iraqi people.

About 90% of Iraq's oil exports go through Basra.

Correspondents say that any shutdown there would badly hamper the country's reconstruction programme.

"I think to a large extent the market has factored in the fact that Iraqi production is going to go in and out," said Peter Beutel, president of the US energy consulting firm Cameron Hanover.

"But supplies are so tight and demand keeps growing."

Yukos dispute

Analysts said continuing uncertainty over the future of Russian oil giant Yukos was also underpinning the oil market.

"There is a lot of uncertainty surrounding Yukos still, and Iraqi exports as well," said Prudential Bache trader Christopher Bellow.

"It is basically a continuation of the same uncertainties that are pushing prices higher."

There are fears that Yukos, which accounts for about 2% of world output, may be forced to suspend production because of a dispute with the Russian government over a multi-billion dollar tax bill.

Ray Holloway, director of the Petrol Retailers Association, said if oil prices remain high for a length of time it would probably feed through to petrol prices in the forecourts.

He predicted that high prices would eventually have an effect, probably "within four to six weeks".

"We will ultimately pay more for our petrol," he said.

A spokesman for BP said: "There are lots of things that affect the price of petrol. Oil prices are one of them."