Thursday, 13 February, 2003, 12:57 GMT
US fuel reserves run to record low

Fuel stocks are running low

Oil prices have topped new 28-month highs in London as fears of war with Iraq rise and the US admitts its fuel reserves have fallen to their lowest levels since the 1970s Arab oil embargo.

The price of benchmark Brent crude oil shot up 63 cents a barrel to $33.08 in early trade to levels not seen since November 2000.

In New York, US light sweet crude peaked at £36.01 a barrel, the highest level since September 2000.

Demand has been triggered by Arctic temperatures in part of the US as well as a two-month anti-government strike in Venezuela, a key fuel exporter to the US.

"Even without the threat of war in Iraq, there is still upside for crude prices," said Gordon Kwan, oil and gas analyst at HSBC in Hong Kong.

"Despite talk of Venezuela increasing production and more Middle East barrels, it's not feeding into the United States yet and we're still in the depths of winter," he added.

Emergency measures?

The low level of stocks has prompted speculation that the US will release some of its emergency stockpile.

But there is likely to be reluctance to eat into reserves ahead of a possible war against Iraq.

Oil prices are also being governed by international politics and the perceived proximity of such a war.

Traders fear that a war could disrupt supplies from both Iraq, which exports under a special oil-for-food programme, and neighbouring countries.

Nervous investors

Despite the war fears, gold prices have been falling this week.

Gold is often seen as a safe haven investment for nervous investors in times of international tension, and the recent falls have taken some traders by surprise.

War jitters had helped gold to six-week-highs a week ago, trading at more than $390 an ounce.

But bullion dropped to $354.00 an ounce in London at 1200 GMT.

"People are very, very nervous indeed... day traders are bailing out as well," said Peter Tse, senior dealer at Scotia Mocatta in Hong Kong.