World oil prices forged to their highest level for 13 years on Tuesday as Middle East violence stoked concern over supply security with US fuel inventories already running low.
London's Brent crude surged US$1.52 a barrel, or 4.4 percent, to US$36.00, its highest level since the Gulf War, following the weekend killings of five Western workers at a Saudi chemicals plant in Yanbu.
The International Energy Agency (IEA), energy adviser to 26 industrialized nations, has warned that high oil prices could "inflict substantial damage on the economies of oil-importing countries and on the global economy."
US light crude rose US$0.94 to US$39.15 a barrel after climbing more than US$0.80 on Monday when London markets were closed for a public holiday.
Attacks in Saudi Arabia and other major producers have intensified concern over supply security from the Middle East, which accounts for roughly a third of global oil production.
The Yanbu attack has heightened fears militants might target oil infrastructure in Saudi Arabia, the world's top crude exporter, where energy facilities are tightly protected.
"The rampage occurred away from the major oil installations but [was] nonetheless alarming," said brokers Refco in a report. "This could be a portent of further disasters."
Barely a week ago US-led forces foiled a coordinated seaborne attempt by suicide bombers at the key Basra oil export terminal in southern Iraq.
Rising Chinese demand and low US fuel inventories have fuelled oil's rally which has pushed prices up by US$12 a barrel, or more than 50 percent, from this time last year.
The International Energy Agency said there was no relief in sight from high prices.
"The hike in futures prices during the past several months implies that recent oil price rises could be sustained. If that is the case, the macroeconomic consequences for importing countries could be painful," the IEA said on Monday.
Fears that new US environmental rules may stop refiners producing enough gasoline to meet holiday demand, as well as a spate of unplanned refinery shutdowns in both the US and Europe, have fueled oil's price rise.
OPEC oil ministers, who control around 40 percent of world exports, have said that the price surge is driven by forces out of their hands.
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