International oil prices shot up yesterday as BP, the UK-based energy group, began to shut down output from Prudhoe Bay in Alaska, representing 8 per cent of US production, after finding leaks in the corroding pipeline system.

Crude oil futures traded on New York's Mercantile Exchange jumped as much as $2.09 to $76.85 a barrel.

Oil futures traded on London's ICE futures exchange hit a record of $78.08, rallying as much as $1.91.

The oil price spurt hit stock prices in Japan, where it contributed to a sharp 2.3 per cent fall in the Nikkei 225 index - the biggest one-day fall in almost three weeks.

The US government offered to supply refineries from its emergency stockpiles following the shutdown.

Saudi Arabia said it could increase production from its fields. Prudhoe Bay accounts for half of Alaska's oil production.

The effect on US gasoline prices was immediate, particularly in California. Traders warned that refineries in the state, which rely heavily on Alaska crude oil, would have to reduce petrol production as their supplies were curtailed in the coming days.

BP said it would take between two and five days to close down the 400,000 barrels a day of production.

BP owns a quarter of Prudhoe Bay but operates the entire field on behalf of ExxonMobil and ConocoPhillips.

The shutdown is embarrassing for the UK oil major, which has been attempting to portray an oil spillage in March - the largest ever at Prudhoe Bay - as a one-off event that was not indicative of the state of the Alaska field.

The company, whose chief executive, Lord Browne, was in Alaska on Friday, ordered the shutdown after tests mandated by regulators found "severe corrosion" in a pipeline.

BP's share price fell 2.12 per cent to 622.5p in London.

But analysts say Prudhoe Bay accounts for only 2.5 per cent of BP's oil and gas production and that earnings would suffer by only 2 per cent, even if the field was shut for the rest of the year.

Only 40 per cent of BP's 22 miles of pipelines in Prudhoe Bay have been tested so far but BP appears to be making a pre-emptive decision to shut down the entire field gradually.

Analysts and energy executives said BP's reaction was more drastic than it would have been before a recent string of bad news from the US.

Barclays Capital said in a note yesterday: "Given the recent record, there is clearly a lot of sensitivity within BP management over its record in Alaska and the sensitivity may be reflected in a heightened degree of caution over the latest findings."

A source close to BP's Alaska management said executives as senior as Steven Marshall, president of Alaska operations, and Lord Browne, were increasingly worried about the prospect of significant action by regulators.