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Friday, 13 October, 2000, 09:22 GMT 10:22 UK
Oil price climbs back to $35
Offshore supply vessels in port
Fear exists that the oil industry won't be able to meet global demand this winter
Crude oil prices returned to the $35-a-barrel level for the second day running in London as the escalating crisis in the Middle East raised fears over global energy supplies.

A barrel of the Brent crude oil had risen 40 cents to $35 a barrel, at 0930 (0830 GMT).

Concern was heightened when British Foreign Secretary Robin Cook said a bomb had blasted the British embassy in the Yemeni capital Sanaa, but no casualties were reported.

The incident follows a suspected suicide bombing of a US navy ship in the Yemeni port of Aden on Thursday which killed six US sailors, and follows increased violence between Israeli forces and Palestinians.

On Thursday in London, the price of Brent crude topped $35 a barrel for the first time since 1990.

The oil price surge comes as activists in the UK reiterated plans to discuss further protests over high fuel prices.

There was a wave of protests across Europe last month after the surging oil price sent the price of petrol sharply higher.

When September's protests were called off in the UK, farmers and haulier groups had said they were giving the government 60 days in which to announce a cut in fuel taxes.

But the latest oil price rise will inevitably put pump prices under renewed pressure.

Wider conflict

Dealers say market nerves have been inflamed by violence in the Middle East.

If the Israeli-Palestinian crisis sparked a wider conflict in the region, it could disrupt oil supplies from some of the world's largest producers, they said.

Similarly stock markets fell, their brief recovery erased by fears of further violence in the region.

"It's a function of the terrorist attack on the US warship in Aden," Salomon Smith Barney oil analyst Peter Gignoux said.

"With a symbolic attack on a US military target, the fear is that you have an aggressive terrorist presence," Mr Gignoux said. "This combined with the level of uncertainty in Israel and Palestine was the last thing you needed."

Oil shortage fears

The violence in the Middle East has added to existing tensions about the levels of heating oil stocks in the US.

There are already fears that refiners are running close to capacity and will be stretched to meet demand this winter, according to the International Energy Agency (IEA).

With low stockpiles and refineries near peak production, the agency warns that "the system is strained and running hard just to keep even".

The price of oil began its ascent to a fresh 10-year high on Tuesday, when the American Petroleum Institute (API) industry group said there was 51% less heating oil in east coast storage than in early October 1999.

The east coast is highly dependent on the fuel to heat homes and offices.

Inadequate

The Organisation of Petroleum Exporting Countries has increased supply three times this year, as part of an effort to bring prices down.

But the moves have been perceived by the market as inadequate and have had only modest success.

In September, the US said it was releasing oil from its strategic petroleum reserve for only the second time in 23 years in a further attempt to cool the market.

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See also:

12 Oct 00 | Middle East
Israel hits back after killings
28 Sep 00 | Business
Oil eases on Saudi assurance
09 Oct 00 | Business
Oil pushes up industry costs
22 Sep 00 | Business
Oil: new rules of the trading game
05 Oct 00 | Business
Oil dips below $30
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