Oil prices near record highs

Oil prices were close to their recent record highs today as strong demand and renewed fears of further terror attacks in the United States unsettled traders.

A barrel of crude cost around 40.30 US dollars in New York after remarks last night by Homeland Security Secretary Tom Ridge that al Qaida could try to disrupt the forthcoming elections.

Data yesterday showing strong demand for oil in the US – which is currently in the summer driving season – has been another major factor in the price surge.

Other factors, including the suspension of exports from Nigeria by producer Total, have also hit the price.

Prices peaked at more than 42 dollars a barrel last month but fell when oil cartel OPEC pledged to hike production by more than two million barrels a day.

Richard Slape, an analyst with Seymour Pierce, said the price was being driven by instability in the Middle East and the threat of terrorist attacks.

He said prices were already high due to factors such as Total’s suspension of exports – which has since resumed – and a pipeline being blown up in Iraq.

“Throw into the pot these comments Tom Ridge made last night about expecting a major terrorist attack and I think that was just enough to drive it back above 40,” he said.

Investec oil expert Bruce Evers agreed that a number of factors, including Total’s stoppage, the explosion of pipelines in Iraq and the threat of a terrorist attack, had pushed oil prices higher.

But he did not believe they would stay at their current levels, adding: “In the absence of a catalyst they will drift back again.”