Oil prices held near record peaks today after a larger-than-expected decline in heating fuels in the United States heightened fears of a winter supply crunch.
US light crude eased 11 cents to $54.30 a barrel, barely $1 below a record high at $55.33 hit on Monday. London's Brent crude climbed 6 cents to $50.58 a barrel.
Prices surged three per cent yesterday after a US government report showed a fifth fall in as many weeks in heating oil inventories at a time when stocks would normally be building.
Heating oil supplies are also running low in other key demand countries, such as Germany and Japan.
The US government reported that US distillate stocks, including heating oil and diesel fuel, fell 1.9 million barrels to 119 million barrels in the week to October 15th, nearly 10 per cent below last year.
A weaker dollar has helped support oil's run-up by cushioning the impact of higher prices for consumers using other currencies.
Evidence is mounting that this year's more than 60 per cent surge in oil prices is starting to bite into economic growth and could dampen petroleum demand next year.
"The recent rise in oil prices has thus been large enough to constitute a significant shock to the economic system," said Fed Governor Mr Ben Bernanke in a speech today.
"Although the difficulties posed by increases in oil prices are less than in the past, the economic consequences are nevertheless unpleasant as higher oil prices still tend to induce slower growth and lower inflation," he said.
Signs have also emerged that oil demand growth in China, which has been running in double digits this year, may be slowing.
Chinese crude oil imports increased by only 5.7 per cent in September versus last year. Over the first nine months of this year supplies have surged by more than a third compared to 2003.