Tight US supplies boost oil price

Oil production is soaring, but so is demand

Oil prices have surged to two-week highs following news that supplies in the US are tightening.

In New York on Thursday, the cost of a barrel of oil rose almost $2 to $44.61, as US stocks fell to their lowest level since March.

The gains come as Ivan, the latest in a string of hurricanes, threatens to curb production in the Gulf of Mexico.

But despite falling US stocks, experts say supply is now outstripping soaring demand in the US and China.

According to the International Energy Agency in Paris, a one million barrel a day increase in pumping by the oil producers' organisation Opec has helped return balance to the market.

Records

In August, the price of US light crude almost reached $50, with the price breaking records on a daily basis.

Worries about Iraqi supplies in the face of sabotage, as well as about a recall referendum for president Hugo Chavez of key producer Venezuela, had conspired with predictions of high demand to push oil prices higher.

These fears also opened up opportunities for speculative dealing, which Opec leaders suggest has added $7 to the price in recent months.

Since the peak in late August, prices have fallen relatively steadily - except for another $2 hike on 1 September, on a previous report about the tightness of US supplies.