Oil prices soar to new highs as traders get jitters over short supplies

OIL prices soared to new highs on both sides of the Atlantic yesterday as traders fretted over increasingly short supplies.

The cost of crude in New York broke through the record of $49.40 a barrel set last month to hit $49.74 by mid-afternoon, making a move through the milestone $50 mark look even more likely. Meanwhile, Brent crude oil found in the North Sea and traded on the International Petroleum Exchange in London rose to $46.25, taking it beyond last week's record of $45.75.

The latest surge came after hurricanes off the US coast disrupted supplies in the region.

The oil-rich Gulf of Mexico has been severely affected by Hurricane Ivan, which temporarily halted production and reduced oil output.

Nigeria was another cause of anxiety as rebels fighting troops in the country threatened to extend their uprising across the whole of the its oil-producing southern region.

Clashes in Saudi Arabia between government forces and suspected al-Qaida militants also contributed to the increase.

Analyst Hilary Cook of Barclays Stockbrokers said the cost of crude was "uncomfortably high," but added that she expected it to cool off again, rather than rise beyond $50.

"The hope is that it will come back," she said. "It is very much a feature of the hurricane which has disrupted supplies from the Gulf of Mexico so badly." She believed the rally was a "short-term hiccup" that had been caused partly by the weather. The price of crude has risen sharply over the past week after it emerged that US stockpiles had fallen at a sharper rate than expected.

Extremely high demand and short supplies have been worsened by factors including disruption in Iraq, fuelling concerns over the amount of oil available to meet winter demand. US oil prices had retreated from record levels in the past month but returned to current levels last week, following data on US stockpiles. Attempts by OPEC to lift production and take the steam off oil prices have had limited success as demand in China and India continues to grow.

OPEC president Purnomo Yusgiantoro said the decision to boost production by a million barrels per day from November has failed to have any "psychological impact on the market".