Oil Closes Above $100 Per Barrel

The price of crude oil closed at more than $100 per barrel for the first time last night following a steep rise prompted by jitters in the commodities market over a possible tightening of supply by countries in the Opec cartel.

On the New York Mercantile Exchange, oil futures briefly hit $100.10 – the highest level since trading began in 1983. The benchmark contract for March delivery of crude oil ended the day at $100.01.

An explosion at a Texas oil refinery sparked early nerves among traders, causing a shutdown of the Big Spring facility which processes 70,000 barrels of oil per day. There was also concern about heightened tension between America and Hugo Chavez's regime in oil producing Venezuela.

But analysts said the real reason for a $4.51 rise during the day was a mounting recognition that Opec could tighten the flow of oil into the global market when oil ministers meet on March 5.

Phil Flynn, an analyst at Alaron Trading, said: "The oil bulls were buffeted with unrelenting winter weather, an oil refinery explosion and an Opec cartel that has no regard for the world economy."

The Opec nations are concerned about the prospect of an economic slowdown in America spreading elsewhere in the world. A reduction in industrial production could reduce demand for oil, pushing the price lower.

Algeria's oil minister Chakib Khelil, who chairs Opec, told Reuters: "Production is not going to increase. It will either decrease or be stable."

The increase bodes ill for motorists who can expect fresh increases in the price of petrol at the pump. In Britain, fuel prices leapt by almost a fifth last year – the biggest increase for a decade – to more than £1 per liter.

An alliance of transport and business groups including the AA, the Rac and the Freight Transport Association has called on the chancellor to scrap a tax increase of 2p per liter scheduled for April.

On the commodities market, oil did briefly exceed $100 during daytime trading at the beginning of January, although it was initially propelled upwards by a "vanity trade" enacted by a Nymex broker who wanted to be the first to buy a barrel at a three-figure price.

Yesterday was the first time the price had ended the day over $100.

Among the issues confronting the oil industry is an increasingly militant stance by the Venezuelan government which is in dispute with Exxon Mobil over compensation for the nationalization of an oil project.

Venezuela last week cut off oil shipments to Exxon and the country's ministers have suggested that the country could go further by severing all exports to the US.

Mike Fitzpatrick, an analyst at MF Global, said: "Venezuela acting to cut off supplies to Exxon last week has kept the market on edge despite efforts by officialdom to downplay the actual impact on supplies."

The oil spike pushed stock prices lower on Wall Street. After spending much of the day in positive territory, the Dow Jones Industrial Average closed down 10 points at 12,337.