Oil price remains above $66 a barrel

Oil held strong above $66 a barrel yesterday as the standoff over Iran's nuclear programme and US refinery glitches supported prices even as the world's big consumers began to feel the pain.

Oil has risen by about 50 per cent this year on worries the industry is struggling to pump and refine enough crude.

French prime minister Dominique de Villepin told reporters high prices were here to stay, and he called on oil firms to plough their sizable profits into new plants.

"This crisis, we know, is likely to last. All the factors have come together for oil to remain expensive in the years and decades to come," he said.

Iran's decision to press ahead with its nuclear program in defiance of the West and rampant fuel demand in the US have helped to fire the latest rally.

Figures on Tuesday showed consumer inflation was feeling the heat. US July consumer prices rose at their fastest rate in three months and UK inflation was at its highest level since comparable records began in 1997.

US crude was trading down 17 cents at $66.10 a barrel yesterday evening, below Friday's $67.10 record, while US gasoline was over $1.97 a gallon after nearly reaching last week's record of just above $2.01. London Brent was down 13 cents at $65.45. Overall, the relentless rise this year has lifted oil towards the inflation-adjusted $82 average in 1980, the year after the Iranian revolution.

The International Energy Agency's chief economist said on Monday that an average $50 a barrel oil price this year would crimp economic growth by 0.8 points.

Yesterday's UK inflation numbers have reduced expectations of further interest rate cuts from the Bank of England.

The the consumer price index rose 0.1 per cent on the month, taking the annual rate up to 2.3 per cent from 2.0 per cent in June.

This is the first time inflation has risen above the Bank of England's 2.0 per cent target since the CPI was adopted as Britain's main inflation measure in December 2003.

The July number exceeded expectations and pushed the pound up and interest rate futures sharply lower as dealers judged that the prospect of further cuts in borrowing costs had disappeared from the agenda.