Oil Hits Fresh High on Summer Supply Fears

Oil rose to a fresh record on the world's commodities markets today, trading at above $115 a barrel on fears that stocks in the US would be inadequate for the summer driving season.

Continuing the strong upward movement of recent days, US light crude hit a peak of $115.45 but fell back as dealers took profits. Brent crude was trading at a record $113.29.

Oil prices have shrugged off the impact of looming recession in the US and a slowdown in the rest of the world to post records for the past three days. The cost of crude is now the highest it has been, even when inflation is taken into account.

Today's rise is likely to mean further increases in prices for UK motorists, already paying well over a pound a liter for unleaded petrol on forecourts.

Dealers said that an expected drop in demand for energy as economic growth weakened was currently being outweighed by concerns about shortages of supply and the weakness of the dollar.

US government data yesterday showed drops in gasoline and crude inventories against analysts' expectations for increases.

"Summer driving season is approaching. And even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain," Jan Stuart, economist with UBS, said.

The dollar was poised to drop through the $1.60 level against the euro today for the first time. Oil is priced in dollars, and as the US currency has fallen on the foreign exchanges the price of crude has risen.