Oil prices surge to 13-year highs in US

US prices roared to their highest close in more than 13 years on Wednesday as a drop in already low gasoline inventories sharpened the threat of a supply crunch that could hurt economic growth.

US crude futures rose US$0.70 to settle at US$38.18 a barrel, nearly 2 percent higher. In London, May Brent crude ended US$0.85, or 2.6 percent, up at US$33.53.

It was the highest settlement for US crude since October 1990.

Prices after the Energy Information Administration, an arm of the US Department of Energy, released its latest snapshot on the world's biggest oil market. The report showed a further 800,000 barrels decline in gasoline stocks to 199.6 million barrels.

US supplies are running 5 percent below the five-year average, sparking concerns refineries will struggle to build supplies in time for summer holiday driving demand.

"What we're seeing now is that some funds had moved to the side making sure there wasn't a bearish surprise and now they are rotating back into the long side," said Jim Ritterbusch, president of Ritterbusch and Associates.

US crude prices have averaged almost US$35 a barrel so far this year, well above last year's average price of US$31, which was the highest in more than two decades.

At the day's settlement, crude futures had risen US$4.31, or nearly 13 percent, since Feb. 10, when OPEC decided it would cut official production quotas by 4 percent from April 1.

OPEC's and rocketing Asian demand from China and India have combined to push prices to levels which consuming countries fear could hurt economic growth.

The head of Germany's export industry association said on Tuesday that oil prices pose a bigger risk to Germany's economic recovery than the euro's exchange rate.

The surge in price led the US to spend an extra US$200 million on oil in January versus December, even though it imported 8 million fewer barrels, according to the US Commerce Department.

In January, the US trade deficit widened to a record US$43.1 billion. Economists say the oil price surge was the spoiler.

OPEC agreed last month to eliminate 1.5 million barrels per day of supply above existing quotas and cut official production limits in April by 1 million barrels per day to 23.5 million barrels.

While OPEC ministers have said they intended to implement the April cuts, there have been few signs of cutbacks in March.

Tanker consultant Petrologistics has told clients it expects the 10 OPEC members with quotas to produce 25.63 million barrels a day in March, down just 150,000 from 25.78 million barrels in February.

One OPEC member, Nigeria, has already apparently reversed its initial cutback plan and added up to 250,000 barrels per day of extra crude at the last minute for April exports.