Page last updated at 16:57 GMT, Tuesday, 13 May 2008 17:57 UK

Oil hits new high on Iran fears

Azadegan oil field, Iran
Iran is one of the world's main oil suppliers

Oil prices have hit a record just shy of $127 a barrel after Iran said it was studying a plan to cut crude output.

President Mahmoud Ahmadinejad said a proposal to reduce Iran's crude output was being reviewed by experts, Iran's Fars News Agency reported.

The report sent US light, sweet crude to a new high of $126.98. London's Brent crude rose to $124.01 a barrel.

Analysts doubted whether Iran would actually cut output but the report sent jitters through oil trading floors.

"That sounds like it would get people excited," said Peter Beutel, president of Cameron Hanover.

"We're in a market where anything bullish is going to be able to push the price higher."


The price of crude oil only topped $100 a barrel at the start of this year.

Its rise since then has led to predictions that the commodity could hit $200 within the next six months.

A number of factors have combined to push oil on its recent record-breaking run.

There have been supply disruptions in Iraq, Nigeria and the UK's North Sea, while there has also been strong underlying demand from China, which is buying crude to fuel its economic boom.

At the same time, concerns about the US economy and a weak US dollar have made oil a more attractive investment.

There have been calls for greater supply by producers cartel Opec, which supplies 40% of the world's oil.

However, Opec has refused to call an early meeting to discuss the current high oil price, insisting that there is enough supply to meet demand.

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