Oil prices close to record high

Prices are at their highest for a year

Oil prices are within touching distance of all-time highs after supply concerns lifted them above $78 (£38) a barrel.

A barrel of US light, sweet crude was worth $78.18 at the end of trading on Tuesday, its highest closing price.

That price was close to the record high of $78.40, reached in the aftermath of the conflict in Lebanon in 2007.

Prices have been rising for weeks after disruptions to Nigerian and North Sea output and concerns that demand will outstrip supply by the end of 2007.

Stockpile data

Light, sweet crude rose $1.35, or 1.8%, while Brent crude rose $1.34 to $77.08 in London.

Whether prices set new records on Wednesday is likely to depend on the latest figures for US oil inventories.

There is something very strong holding this market up Tony Rosado, IAG Energy Brokers

The US Department of Energy is expected to reveal that stocks fell last week as demand from refineries continued to rise, but the scale of the drop remains key.

Analysts are divided on whether the recent surge in prices can be sustained.

Stock markets have recovered from last week's turbulence, and the latest projections for the amount of oil available against demand remain tight.

"There is something very strong holding this market up," said Tony Rosado of IAG Energy Brokers in Florida.

But analysts point out that prices fell steeply in the autumn of 2006 - dropping more than $15 in just two months - after the peak holiday season in the US.

"If you look at the charts, I am not sure we can sustain these type of highs," said Mark Waggoner, from Excel Futures.