Page last updated at 02:44 GMT, Saturday, 7 June 2008 03:44 UK

Oil price soars as US woes mount

Oil rigs in California
Oil prices have jumped amid increasing production worries

The price of oil has made a record jump to nearly $139 a barrel, amid reports it could reach $150 by July because of rising demand and political tension.

Crude in New York gained more than $10 - its biggest-ever one-day rise.

The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.

It also comes as energy officials from the world's biggest consuming nations meet in Japan to discuss fuel prices.

Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets.

On Friday light crude set a high of $139.12 in after-hours trading on the New York Mercantile Exchange after hitting $138.54 at the regular session.

Crude oil hit a record high of $135 a barrel last month.

If Iran continues its nuclear weapons program, we will attack it
Shaul Mofaz
Israeli transport minister

The BBC's North America Editor, Justin Webb, says the gloomy figures are a reminder to all Americans that the nation faces serious economic problems and perhaps even a recession.

Oil prices were given a boost on a report by Morgan Stanley analyst Ole Slorer, who suggested the price of oil could rocket to $150 as early as July.

Some analysts have suggested that prices would reach as high as $200 a barrel during the next 18 months.

The price of the benchmark light, sweet crude oil has already seen rapid gains over the past months and has gained more than 40% over the year.

The market was also responding to a statement by Israel's transport minister that an attack on Iran was "unavoidable" after sanctions to prevent Tehran from developing its nuclear capability had failed.

Investors hedging oil against the weak dollar has also pushed up the price of oil.

Fears that workers at Chevron Corporation in Nigeria may go on strike and subsequently disrupt production and access to oil are also adding to market jitters.

Sustained demand?

Oil prices had recorded losses earlier this week after doubts about future demand took hold of the market.

Both the Indian and Malaysian governments have raised fuel prices in order to cut the subsidies they provide.

The International Energy Agency (IEA), an adviser to 27 industrialised countries, had said it could lower its 2008 demand growth projection further, after having already more than halved it to 1.03 million barrels per day.

But several analysts have proven bullish about future prospects.

Harry Tchilinguirian, oil analyst at BNP Paribas in London, said demand would be sustained by expanding Asian nations.

"World oil demand growth is still accounted mostly by China, the Middle East and Latin America - and through the summer, there is no reason to expect a material slowdown in demand growth in these areas," he said.

Nuclear concerns

Correspondents say oil prices were also pushed up by Israeli threats to strike on Iran over its nuclear programme.

Despite widespread international concern over Iran's nuclear programme, Tehran insists it is developing its technology only for civilian purposes.

Israeli transport minister Shaul Mofaz told the Yediot Aharonot newspaper an attack on Iran's nuclear facilities seemed inevitable.

"If Iran continues its nuclear weapons program, we will attack it," he told the daily.

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