Fed officials ease oil concerns

The oil market has had little time to pause during the past months

A recovery in the world's largest economy is likely to continue, despite oil prices surging to record levels, US Federal Reserve officials said.

Speaking on US television on Monday night, Fed governor Ben Bernanke said that while higher oil costs may slow expansion, they would not derail it.

Dallas Federal Reserve Bank President Robert McTeer echoed this optimism during a separate TV appearance.

Markets have become jittery in past weeks amid concerns about oil supply.

Positive signs

The Fed, which raised US interest rates two weeks ago, is more optimistic about the outlook.

"There's going to be a little bit of a slowdown effect," Mr Bernanke said during an interview on PBS's 'Nightly Business Report'.

Why are oil prices so high?

"But at current levels, anyway, I think it won't derail what looks like a self-sustaining expansion at this point."

He added that consumer spending "has picked up fairly considerably... and that is going to support growth going forward".

On business channel CNBC, Mr McTeer also underlined the robustness of the US economy.

"I don't think it is in jeopardy," he said. Growth "is self -sustaining and it's not terribly fragile".

Off the boil

Helping soothe investors' nerves further, the price of oil on Monday fell back from recent record highs after pumping in northern Iraq resumed.

Southern exports also are returning to normal levels following militia threats to pipelines.

Oil prices are causing headaches

A barrel of New York light crude fell 67 cents to $46.05, while in London, benchmark Brent Crude slid 51 cents to $43.03.

Analysts said that any dip may be short term and prices still may top the $50-a-barrel mark.

Prices are buoyed by the fact that the majority of producer countries are pumping oil flat out, while demand is being stoked by booming growth in countries such as China and India.

That leaves very little room for manoeuvre should there be any disruption to output.

A number of companies, governments and analysts have warned that the subsequent higher fuel and raw material costs are likely to dent profits and may force them to trim growth forecasts.