Oil prices slip back after coming close to $50 level

Oil prices surged closer to $50 a barrel after hitting yet another record high in the US yesterday, as confusion reigned over the fate of Najaf, sparking fresh fears about Iraq's oil supplies.

Oil prices surged closer to $50 a barrel after hitting yet another record high in the US yesterday, as confusion reigned over the fate of Najaf, sparking fresh fears about Iraq's oil supplies.

US light crude touched $49.33, breaking the $49 barrier for the first time since crude futures were launched on the New York Mercantile Exchange in 1983. It later fell to settle at $47.86. London's Brent crude soared as much as 82 cents to a record $45.15 a barrel, before easing back to close at $43.54.

Prices spiked after conflicting reports about whether police had managed to seize control of a shrine in Najaf, the focal point of insurgency across Iraq. Fighters thought to be loyal to Muqtada Sadr, the Shia cleric, set fire to the headquarters of Iraq's South Oil company in Basra early yesterday. "While it looks that the quest for $50 has stalled, the market is still sceptical that the situation in Najaf has improved and crude could still hit $50 later in the session," Phil Flynn, a market analyst at Alaron Trading in Chicago, said.

Traders also latched on to comments from John Snow, the US Treasury Secretary. He reiterated the government's reluctance to tap the US Strategic Petroleum Reserve. "I don't think that would have much effect. The energy experts I've talked to all indicate that current prices are abnormally high, something of a bubble, and ought to recede as the uncertainties get clarified," Mr Snow had said.

Oil prices have surged more than a third since the end of 2003 on worries that accelerating global demand has left supplies tightly stretched with little leeway for disruption. Fresh figures showed China's crude imports soared 40 per cent in the first half of the year, while India's oil imports are expected to rise 11 per cent in 2004. Iraq's shipments have almost halved to about 1 million barrels a day since April.

Purnomo Yusgiantoro, the president of Opec, said the continuing rise in global oil prices had yet to affect inflation, and that the oil exporters cartel would wait until its meeting next month before making any fresh moves to increase supply.