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Last Updated: Monday, 8 August 2005, 21:41 GMT 22:41 UK
Oil prices peak on Saudi threat
Police car patrolling in Riyadh, Saudi Arabia
Security is high in Riyadh, the Saudi capital
Oil prices are breaking fresh records following the closure of the US embassy in Saudi Arabia.

The US is to shut diplomatic offices in Riyadh, Jeddah and Dhahran for two days after receiving what it described as a threat against government buildings.

The security scare comes less than a week after the death of Saudi's King Fahd, which also caused prices to jump.

US light sweet crude rose $1.63 (0.91) to $63.94 a barrel, and UK benchmark Brent crude - rose $1.63 to $62.70.

The rising price was also underpinned by continuing problems for US refineries, sparking fears of a petrol shortage.

It's safe to infer that the demand for oil and diesel will remain pretty firm
David Thurtell, Commonwealth Bank of Australia

Two facilities - one in Texas and another in Pennsylvania - faced shutdowns following fires and repair work, taking the total number of refineries where problems have been reported to nine in the past two weeks.

The US economy is being seen as strong following the release on Friday of the best payroll figures for five months, indicating that the demand for energy is likely to stay strong.

High vigilance

The US is planning to close diplomatic buildings in Saudi Arabia, the world's largest oil exporter, on Monday and Tuesday.

It is limiting non-official travel for diplomatic staff and has urged all other US citizens working in the country to maintain a high level of vigilance.

However, the Saudi government said it had no information about a specific threat to US interests in the country.

The oil market has been on edge since the death of King Fahd last week.

Although Saudi Arabia's new ruler has pledged to maintain a stable oil policy, traders have expressed concern about the long-term royal succession in the oil-rich kingdom.

Opec action

These fears, allied to concerns about worsening relations between Iran and the US and disruption to refining output in the US, have kept prices near historic peaks.

Oil producers body, Opec, has acted to try and cool prices by raising output by 300,000 barrels a day over the last two weeks.

However, analysts said that this was likely to have little impact amid continuing geopolitical worries and feverish demand for oil worldwide.

"The US economy looks healthy and it's safe to infer that the demand for oil and diesel will remain pretty firm and that the price of oil should be helped along as well," David Thurtell, commodities strategist with Commonwealth Bank of Australia, told Associated Press.

Hear why petrol prices could rise even further

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