Oil price continues to rise

The price of oil stood above 96 US dollars a barrel today as dealers awaited a report expected to show a further fall in US crude stockpiles.

Light, sweet crude for February delivery gained 46 cents to 96.44 US dollars in Asian trading on the New York Mercantile Exchange (NYMEX).

The latest pressure on oil prices came ahead of a report due tomorrow and likely to show the seventh straight weekly decline for US inventories.

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.

The higher prices have led to misery for motorists after average petrol prices soared past the £1-a-litre mark in November.

Oil prices rose by more than 50% last 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.

The price hikes have also hampered the Bank of England’s efforts to keep a lid on inflation.

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.

Despite expectations of an easing in prices during 2008, analysts said the market was likely to remain volatile.

Jeff Brown, managing director and chief economist at FACTS Global Energy in Singapore, said: “Fundamentally, I think there may be downward pressure on price, but if there’s any supply outage or major turmoil or major problems in producing areas you could easily see prices spike over 100 US dollars a barrel.”

At 293.6 million barrels, US crude oil inventories now stand at their lowest level since January 2005, and are in the lower half of the average range for this time of year.