Oil hits 11-month high and more rises expected

Oil prices rose to an 11-month high above $76 (€55.8) a barrel yesterday as rising global oil demand and North Sea oil field maintenance exacerbated supply worries.

London Brent crude, currently seen as a better indicator of the global market, climbed to an intraday high of $76.34 a barrel, the highest level since August 2006. The all-time record high for Brent is $78.65, reached on August 8th, 2006.

"The oil price is at very high levels for good reasons and there's every possibility we could see further strength in coming months," said David Dugdale, an analyst at MFC Global Investment Management.

"With Opec continuing to withhold oil from the market, the general picture remains one of tightness, with kidnappings in Nigeria, the upcoming hurricane season and ongoing geopolitical concerns all adding to uncertainty over the summer."

By mid-afternoon, the August delivery contract for Brent crude traded 38 cents higher at $76 a barrel. US crude fell 44 cents to $72.37 a barrel.

The International Energy Agency (IEA), adviser to 26 industrialised countries, said world oil demand would rise faster than expected until 2012 while supply lags. "Despite four years of high oil prices, this report sees increasing market tightness beyond 2010," the IEA said in its medium-term oil market report.

But Opec ministers disagree, saying refinery bottlenecks and geopolitical tensions are to blame for high oil prices this year, not supply shortages.

Algeria's energy and mines minister Chakib Khelil said there was "not much" Opec could do to bring down prices as global crude oil stocks were already sufficient.

"There is plenty of stocks. It's a problem with capacity and refining," Mr Khelil said ahead of a gas pipeline conference in Brussels.

"Even if it increases production, it's just going to increase stocks and not have any effect because prices are drawn by petroleum product prices." - (Reuters)