Oil prices rise amid US supply concerns

Oil prices rose above US$97 a barrel today after the US government reported larger-than-expected declines in crude and heating oil stockpiles.

Inventories fell by 3.3 million barrels last week, more than double the 1.3 million barrel decline forecast by analysts.

The perception that supplies may be inadequate to meet demand caused light, sweet crude for February delivery to rise $1.28 to $97.25 a barrel on the New York Mercantile Exchange (NYMEX) after earlier rising as high as $97.69.

Oil prices also rose on news of the assassination of Pakistani opposition leader Benazir Bhutto, which raised concerns about geopolitical stability.

In London, December Brent crude rose $1.24 to $95.18 a barrel on the ICE Futures exchange.

NYMEX crude came within touching distance of $100 dollars a barrel in November - reaching a record $99.29 - on fears over US stock levels, a weak dollar and concerns over conflict in northern Iraq disrupting supplies. The region has the world's third-biggest oil reserves.

Oil prices have risen by more than 40% this year, also driven higher by speculative buying - traders betting that the price would rise - and investors using oil as a hedge against the weakness of the dollar.

Next year costs should ease back as the world's economy slows, dampening demand.

The Opec oil cartel, which decided against raising production levels in December, will also consider lifting output in February after stronger-than-expected winter demand.