Oil prices shot to a 12-year high today as severe winter weather in the United States drained fuel stocks to leave energy consumers dangerously exposed ahead of possible war in Iraq.
US light crude reached $38.74 a barrel, the highest oil price since Iraq's invasion of Kuwait in 1990 when crude peaked at over $41. London Brent gained 66 cents to $33.52, near a two-year high.
"It's all down to a shortage of heating oil and natural gas in the United States, backed up by the prospect of war," said Mr Christopher Bellew of brokers Prudential Bache in London.
US government data show winter demand for distillates, including heating oil, has been running 20 per cent higher than in 2002, leaving stocks down 33 per cent on the year.
The inventory fall has been driven by an extended cold blast in the US northeast, the world's biggest heating oil market, that is expected to continue through to next week. Imports from Venezuelan refineries have been hit by an 11-week-old strike.
Oil price gains were underpinned by a continued US push for military action against Iraq in the face of stern opposition from Russia, China and France.