Oil soars to new high above $104

Petrol and electricity costs are surging on the higher oil price

The price of crude oil has hit a record high above $104 a barrel, after US government data showed an unexpected decline in stockpiles last week.

Light sweet crude in New York settled $5 higher at $104.52 in New York while Brent crude rose $4.17 to $101.70, also representing a new record.

Prices rose after data showed inventories fell considerably, countering forecasts of an increase.

Also keeping oil high was Opec's decision to leave production unchanged.

Analysts had expected inventories to increase by 2.4 million barrels last week but instead stocks were 3.1 million barrels lower.

'Well supplied'

Earlier in the day members of the oil cartel Opec, meeting in Vienna, said they saw no reason to change output of 32 million barrels a day because supply issues were not pushing up prices.

On Monday crude oil had come close to $104 in New York.

US President George W Bush said high prices were hurting the US economy and could exacerbate any slowdown.

Opec oil ministers believe the high oil price is not caused by lack of supply and fear demand for oil may fall in future.

"The market continues to be well supplied with crude oil," said Opec president Chakib Khelil.

OPEC MEMBERS Algeria Angola Ecuador Indonesia Iran Iraq Kuwait Libya Nigeria Qatar Saudi Arabia United Arab Emirates Venezuela

"In recent months, there have been signs that the oil market is moving into a new phase," he added.

"This has reflected developments in the world economy, which is now entering a period of slower growth, after an unprecedented six years of strong expansion."

Any drop in economic growth is set to limit demand for oil, analysts said.

Even so, they warned that while US growth may be slowing, strong economic expansion in the Asia would offset any dip in demand and keep up pressures on supply.

"The decision came as expected. But I think it is a mistake," said Rank Schallenberger of Landesbank Baden-Wurttemberg.

'Biggest customers'

President Bush joined the calls on Tuesday for Opec to raise production.

"Understand the consequences of high energy prices," he said.

"I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices."

The US believes an increase of 300,000-500,000 barrels per day could reduce prices and lower economic damage.

But Qatari oil minister Abdullah al-Attiyah replied that Opec could not influence the geo-political situation or the actions of speculators, which he blamed for pushing up the price of oil.

"I think President Bush, he knows that we cannot control both of these," Mr Al-Attiyah said.

After the meeting in Vienna, the organisation said in a statement, "increased uncertainty and volatility call for continued vigilance".

It reiterated its commitment to market stability and said it would ensure "adequate supplies" in future.