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Last Updated: Thursday, 7 October, 2004, 20:33 GMT 21:33 UK
US oil climbs to $53 price peak
Texas refinery
Hurricane Ivan has disrupted supplies to US refineries
US crude oil prices reached a fresh record high on Thursday, amid surging demand, worries over possible supply shortages and a strike in Nigeria.

Prices breached $53 a barrel, their highest level since the futures contracts were introduced 21 years ago, before eventually closing at $52.67.

UK-traded Brent crude oil also hit a record high, reaching $49.20 a barrel, before ending the day at $48.90.

In Nigeria oil unions began a surprise strike over re-organisation plans.

Although Shell said output was unchanged, it helped push prices up

"We're in uncharted territory. There aren't many reasons to sell and there's lots of reasons to buy oil," said David Thurtell at Australia's CBA bank.

World oil prices have hit a series of new record highs in recent weeks as global supplies struggle to keep pace with soaring demand in the US and China.

Supply constraints

The steady erosion of the oil industry's spare production capacity has made prices highly sensitive to the threat of supply disruptions.

Higher prices for petrol and other fuel
Higher air fares
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The latest surge in prices was triggered partly by news of industrial unrest in Nigeria.

Independent port inspectors SGS said that Royal Dutch/Shell's Nigeria crude loadings will go "on hold" because of the two-day strike by Nigerian oil unions that began on Thursday.

SGS said the strike by the Nupeng and Pengassan unions was against Shell management reorganisation plans.

Shell pumps about a million barrels a day of Nigeria's total output of 2.3 million barrels a day.

'Cushion eliminated'

Prices are also rising because it will take longer than previously thought for oil platforms in the Gulf of Mexico to recover from damage caused by recent hurricanes.

The US government said on Wednesday that it could take up to 90 days to restore production at offshore drilling platforms that were destroyed by Hurricane Ivan.

The hurricane put seven platforms out of action as well as damaging mobile rigs and springing leaks in oil and gas pipelines.

Ivan also disrupted operations at refineries in the Gulf, which are currently working at 90% capacity.

"Ivan has completely eliminated the cushion of spare distillate stocks in the Atlantic basin," said Yasser Elguindi of Medley Global Advisors.

"Across the globe there is rising oil product demand and little spare refining capacity to meet it."

Official figures showing that US crude oil stocks rose by a lower than expected 1.1 million barrels to 274 million barrels in the week to 1 October also supported the market.

Price rise 'still manageable'

Experts say that worries about security in the Middle East and sabotage in Iraq are also helping to keep prices high.

And some believe that recent price rises partly reflect an increase in speculative trading in oil, as investors look for quick returns by buying and selling oil futures.

There are clearly downside risks to global growth because of oil prices
David Robinson, IMF

US crude prices have now risen 60% since the end of last year, prompting economists to warn that higher energy costs could push global growth lower in the months ahead.

David Robinson, the deputy head of the International Monetary Fund's research department, said on Thursday that the IMF's forecast of 4.3% global growth in 2005, issued last week, was already out of date.

He said the IMF would revise the figure down to about 4% if it were to put out its forecast today.

"There are clearly downside risks to global growth because of oil prices looking forward," said Mr Robinson.

However, while he said the oil price surge was "distinctly uncomfortable", he added it was "still manageable".

When adjusted for inflation, oil prices remain below the all-time peak they hit in the wake of the Islamic revolution in Iran in 1979.

Then, one barrel of oil was worth the equivalent of $80 in today's terms.

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