Oil prices surge to record high

There are still worries about the situation in Nigeria

Continued production problems in the US Gulf of Mexico, following Hurricane Ivan, have seen oil prices climb to a record high of more than $51 a barrel.

US light crude settled at a record closing price of $51.09 on Tuesday, up $1.18, having hit a $51.29 high.

Nearly 29%, or about 480,000 barrels a day, of the Gulf's oil output is shut in, three weeks after the hurricane.

It follows uncertainty about production in Nigeria and comes when world output is already at near full capacity.

London-traded Brent crude touched a record $47.15 a barrel, before dipping to $46.93 in late trading.

'Serious situation'

Traders said the market had responded to a US Department of the Interior report stating that more than 15 million barrels from the Gulf had been disrupted over the past three weeks by the hurricanes.

"It took the market a while to recognise how serious the situation in the Gulf of Mexico is," said PFC Energy analyst Seth Kleinman.

"US production has been slow to recover from Hurricane Ivan and people are worried by the low level crude and distillate inventories ahead of winter," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

WHAT OIL AT $50 A BARREL COULD MEAN FOR YOU Higher prices for petrol and other fuel Higher air fares Higher costs for all companies, possibly leading to job losses Higher retail prices as costs are passed on Economic growth hit as consumer spending falls How will $50 a barrel hurt you? Why are oil prices so high?

"People are still watching Nigeria and Iraq. With Opec producing almost at full capacity, any stoppage in Iraq's or Nigeria's exports would upset the supply-demand balance.

"It's a very dangerous situation."

On Friday the price of crude oil had topped $50 at the close on New York's Nymex market.

Oil inventories

Prices dropped back slightly after a truce between Nigerian oil rebels and the government seemed to guarantee production from the Niger Delta region.

Crude flows of about 2.3 million b/d had been under threat.

But oil traders remain edgy about the situation, as they do about Iraq, where saboteurs have been regularly attacking pipelines.

It is speculation, pure speculation Fadel Gheit, Oppenheimer

The two countries between them produce more than 4.5 million b/d - more than twice the amount of spare production capacity held by Opec members, most of that in Saudi Arabia.

Some traders have blamed the latest price rises on market speculators.

"It is speculation, pure speculation," said Fadel Gheit, market analyst with Oppenheimer.

"It is a bubble like the internet bubble. It is not justified by supply or demand."

US oil inventory data, due out on Wednesday, may offer a gauge of how comfortable oil supplies are in the weeks ahead of the northern hemisphere winter.