Oil surges on worries over 'driving season'

Oil prices surged to fresh highs above $57 a barrel yesterday amid fears that stocks of gasoline in the US would not be sufficient to meet demand in the upcoming "driving season".

Oil prices surged to fresh highs above $57 a barrel yesterday amid fears that stocks of gasoline in the US would not be sufficient to meet demand in the upcoming "driving season".

The market also continued to be spooked by a report released on Thursday from Goldman Sachs, the world's biggest trader of energy derivatives, which suggested that the price of crude oil could go as high $105.

Production problems at some US refineries over the past week have deepened concerns over whether refiners will be able meet gasoline (petrol) demand this summer.

For the past month, US gasoline demand has been 2 per cent higher than the same time a year ago, despite record pump prices. The US Energy Information Administration reported on Wednesday that gasoline stocks fell 2.9 million barrels to 214.4 million barrels last week, the fourth decline in a row.

Leo Drollas, the chief economist at The Centre for Global Energy Studies in London, said: "Stocks of gasoline are falling. The worry is that if stocks cannot be built up now, what happens in the driving season?"

Americans tend to motor across the country for vacations, starting from the last week of May. Nymex gasoline futures jumped to a record of $1.7050 a gallon yesterday, gaining 4.19 cents on the day.

"The markets are tight but traders are also on tenterhooks, thinking 'what if something else happens now? Like a strike in Nigeria or something terrible in Iran'," Mr Drollas said.

The supply of oil is also just keeping up with booming demand, due mostly to robust demand from the US and China. It was the continued strength of demand that led analysts at Goldman Sachs to predict that the world may now be entering a "super-spike" period, which would mean a sustained period of very high oil prices.

In New York, light sweet crude rose to a record $57.70, before settling at $57.25, up $1.85. London's Brent crude ended up $2.22 at $56.51, having touched $56.60.

Separately it emerged that the International Energy Agency is about to publish a report that will advise countries on how to reduce the use of petrol. The "demand restrain policies" that may be needed in an energy crisis, according to the IEA, include shortening the working week and reducing motor speed limits by 25 per cent.