US shortfall sends oil price soaring

Oil prices are on the verge of a new record after a report revealed a large drop in US petrol stockpiles before the start ofthe summer driving season.

The US Energy Information Administration said stocks of "distillate", which includes diesel and heating oil, slipped by 4.2 million barrels, far surpassing expectations of a 1.4 million-barrel decline. Domestic gasoline supplies fell for the sixth consecutive week, dropping by 3.9 million barrels.

Addison Armstrong, of TFS Energy in the US, said: "We have a distillate draw way beyond what anybody thought. The US trucking industry needs the diesel component of distillates to support huge demand, and this is going to be a problem this summer."

Crude oil futures touched $69.80 in New York before closing at $68.62. Many analysts predicted the price would rise above $70. The record of $70.85 was set on 2 August after Hurricane Katrina struck product and refineries along the Gulf of Mexico.

Separately, the International Energy Agency, which advises industrialised countries, said Opec would have to pump more oil to fill a gap from Russia and other suppliers.

Most Opec members are already producing close to their output limits but the group has missed its output target of 28 million barrels per day every month this year, mainly because rebels have shut a quarter of Nigeria's output.

The IEA forecasts 2006 demand for Opec oil will be even higher - 29.4 million bpd. It said: "With ongoing attacks on supply infrastructure in Iraq and Nigeria, Opec supply from these two producers alone is probably 750,000 to 1 million bpd lower than might have been expected a few months ago."