US gas guzzlers drive up oil prices

Oil prices rose to their highest level in three months last night as evidence pointed to dwindling US stocks on the same day that Opec agreed to peg production at current levels.

With American demand rising during the summer "driving season", the oil cartel's meeting in Doha decided to keep a watching brief on output ahead of the return of Iraqi oil to the market. It intends to meet again at the end of July to review production and prices, adding that it was keen to include non-Opec members such as Russia in any deal.

In London, the cost of a barrel of benchmark Brent crude rose 22 cents to $28.30, while the price of US light sweet crude was up 45 cents to $32.18.

Analysts said figures from America showing that already low crude stocks had fallen again were a greater shock to the market than the widely expected decision of Opec to leave supply quotas unchanged at 25.4m barrels a day. US fuel stocks are about 12% lower than a year ago.

Despite the gradual firming of the oil price since the end of the US-led war to topple Saddam Hussein, Opec remains concerned that global prices will fall once Iraq has repaired the damage to its fields caused by military action, sabotage and looting, and is able to export its old quota of almost three million barrels a day.

Explaining the decision to hold another extraordinary meeting on July 31, Iran's Opec governor, Hossein Kazempour Ardebili, said: "Holding meetings every 45 days limits speculation; because of the uncertainty at the moment on the world market, we want to meet as often as possible. Frequent meetings convey to the market the message that Opec is being very vigilant and will take measures if necessary, and that keeps prices up."

Venezuelan energy minister Rafael Ramirez said Opec would cut its oil supply quotas in July if the cartel saw Iraqi production returning to a million barrels a day.