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Last Updated: Monday, 7 August 2006, 21:55 GMT 22:55 UK
Oil reaches high after BP closure
BP engineer examining section of oil transit pipeline
BP is now inspecting its entire network of pipelines at Prudhoe
The price of oil in London hit a new record after BP said it would have to close one of the largest oilfields in the US because of a pipeline leak.

Brent crude futures touched a high of $78.64 late on Monday - beating the previous record set on July 17.

The indefinite shutdown of the Prudhoe Bay oil field, which produces about 8% of US daily oil output, comes at a time when oil markets are already jittery.

The ongoing conflict in Lebanon has kept prices close to record highs.

Producers' group Opec expressed worry at the closure, but said it had enough spare capacity to meet any shortfall.

US Energy Secretary Sam Bodman said the government would loan oil from the nation's Strategic Petroleum Reserve if needed.

The Brent crude record was hit after the extent of the problems affecting Prudhoe became clear. It later slipped back to $78.30.

US light, sweet crude was trading up $2.22 at $76.98.

Meanwhile, BP shares fell 2% to 622.5 pence as investors speculated that the lost production could hurt BP's bottom line.

Major impact

BP said it would shut the oilfield - which produces 400,000 barrels a day - over the next couple of days because of corrosion discovered on an oil transit line on the site.

This followed a small spill from the pipeline on Sunday in which an estimated four to five barrels were lost.

BP said the spill had been contained and the firm was now inspecting 22 miles of pipeline it operates at Prudhoe for similar problems.

We don't know how long the field will be down
Darren Beaudo, BP spokesman

"We don't know how long the field will be down but we will not resume operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment," said company spokesman Darren Beaudo.

BP is already facing a criminal investigation after a leak from a stretch of pipeline on the site earlier this year resulted in the loss of 267,000 gallons of oil.

BP owns a quarter of Prudhoe's 400,000 barrel per day output, the remainder being owned by ConocoPhillips and ExxonMobil.

Supply threats

Analysts said the disruption would force prices up at a time when the conflict involving Israel and Lebanon was unnerving the market.

Among other threats hanging over global oil supplies are militia activity in Nigeria, which has disrupted about a quarter of the country's oil output, escalating violence in Iraq and the international community's dispute with Iran over its nuclear ambitions.

BP chief executive Lord Browne visiting Prudhoe recently
BP boss Lord Browne visited Prudhoe only a few days ago

"The BP field is a sizeable stream," said Tony Nunan, a risk manager at Mitsubishi Corporation.

"The world is already concerned about supplies, and this is just adding to concerns."

Officials have reassured consumers that the closure of Prudhoe will not affect petrol or diesel supplies.

"It certainly isn't going to create any shortages," Tancred Lidderdale, an analyst with the federal Energy Information Administration, said.


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