Surging oil prices darken inflation outlook

Oil prices climbed to within a cent of a record close in New York on Friday, raising concerns about the effect of higher energy costs on inflation.

The surge is of particular concern as the threat of interest rate increases continues to alarm creaking global stock markets while adding to fears about a credit crunch.

In New York, crude closed at $77.02 a barrel, just below the $77.03 record set on 14 July 2006. Analysts said oil prices could keep rising next week, possibly breaking through the symbolic $80 mark.

Oil prices were lifted by a US Commerce Department report that showed American economic growth was a quicker-than-expected 3.4 per cent in the three months to the end of June. That pushed expectations about demand levels higher and saw traders buying up oil contracts.

In London, Brent crude rose by $1.08 to finish at $76.26 a barrel.