Crude prices boost oil shares

OIL company shares are poised to soar after a powerful rally in New York on Friday lifted crude prices to their highest level for a year.

The price of light crude oil for June delivery on the New York Mercantile Exchange rose 55 cents to dollars 19 a barrel. Heavy trading also pushed July crude up by 30 cents to more than dollars 18, as refiners in the US Midwest continued to build up stocks.

Dealers said a steady stream of tankers has been heading across the Atlantic with Brent and West Africa crude in recent weeks.

In London, Brent futures for July delivery rose 21 cents to close at dollars 16.55, the highest this year.

The recovery stems from strong economic growth in the US, a gradual drawdown on world oil stocks and speculative buying by US investment and hedge funds.

A cold winter in the US and continental Europe has mopped up excess stocks as the Organisation of Petroleum Exporting Countries (Opec) sticks to its production ceiling of 25 million barrels per day. Saudi Arabia, the biggest exporter, has also hinted that it will not raise production until a 'strong' oil price has been achieved.

If sustained, the higher price will increase industry's costs, which are already rising because of a surge in commodity prices. But it is good news for oil company shares.