Storm pushes oil prices towards record level

Oil prices remained close to record levels today as news of a storm heading towards Florida sparked fresh concerns over supplies.

The prospect of tropical storm Bonnie hitting the Florida coast – a key production area – added to an already jittery market.

The cost of a barrel of crude stood at $44.68 in New York, just below yesterday’s new record of $45.04, which was the highest level in 21 years.

The continued pressure on prices came as the International Energy Agency revealed that oil cartel Opec’s spare capacity shrank to just 600,000 barrels a day in July. The energy watchdog warned the high prices were “causing economic damage”.

It said: “The market is tight, production and infrastructure capacity is less than desired and uncertainties continue to weigh on the market.”

Motorists and airline passengers have been among those hit by recent sky-high oil costs as producers work flat out to meet increasing demand.

Drivers were yesterday warned to expect another rise on petrol prices over the next month as fuel companies pass on the impact of the rise.

Paul Horsnell, head of energy research at Barclays Capital in England, said that although hurricanes were common in Florida, this had a larger than normal impact on prices due to the tight supplies.

He also said it was “not inconceivable” that the cost of crude could hit $50 if the situation in Iraq becomes much worse.

A string of rallies have pushed the cost of oil to new heights in the past 10 days.

Fears of terrorist attacks, disruptions to Iraqi crude exports, and financial troubles at Russia’s largest oil producer, Yukos, have all fuelled soaring prices.

Both British Airways and Virgin Atlantic more than doubled their long-haul fuel surcharges with effect from today as a result of the hikes.