World oil prices near $69 over Tehran crisis

Anxiety over supplies from producer countries Iran and Nigeria drove oil prices nearly $2 a barrel higher yesterday and analysts predicted the market would stay strong for the foreseeable future.

US crude oil gained $1.52 to $68.35 a barrel after hitting a peak of $68.80 - the highest level since September 2, while London Brent crude rose $1.20 to $66.43.

Crude prices have jumped more than 8 percent so far this year, bringing them within striking distance of the record $70.85 in August. 30 after H"The market is so delicately balanced," said Mark Keenan of MPC commodity fund.

"It faces a convergence of bullish factors."

In the world's eighth largest oil exporter Nigeria, more than 220,000 barrels per day of crude have already been shut in and militants warned they would soon resume attacks on oil producers in the country.

Worldwide demand for crude oil is expected to rise by 1.9 per cent in 2006 to 84.8 million barrels per day (bpd), Opec said in a report yesterday.

This estimate is down slightly from a December prediction by the Opec that foresaw demand rising to 84.9 million bpd.

The report, published shortly before a January 31 meeting of the 11-member cartel, came as Iran called for a reduction in oil production this year.

Opec's estimate for world oil demand in 2005 has been revised to 83.2 million bpd, with growth down from December 2005 estimates but up 1.1m bpd or 1.4 per cent compared to 2004.

Opec said the economy would still be strong in 2006 and worldwide growth, estimated at 4.3pc, would lead to higher oil consumption in all major regions except for the part of Europe west of Russia.

Demand in industrialised countries is expected to increase by 700,000 bpd, or 3.2pc, while demand in China is to jump 6pc, making China a consumer of about a fourth of the world's crude oil, the report said.

"It remains unclear whether this solid start to the year will be maintained throughout 2006," the report said however, adding "supply fears in West Africa and rising geopolitical tensions in the Middle East" were putting pressure on crude prices.

Opec said the US economy was "a particular cause for concern" as "any retrenchment by the American consumer could have a significant impact on Asian growth."

The average price per barrel for oil, as determined by Opec's "reference basket" was $50.64 in 2005, up 40pc from the previous year, according to Opec.