Oil prices rose to the highest level for almost three weeks here on Wednesday on the back of a sharp contraction in US crude stock levels, dealers said.
The benchmark Brent North Sea crude oil for November delivery hit 32.65 dollars a barrel in early trading before easing to 32.53 dollars, still up markedly from 31.85 dollars at the close on Tuesday.
Closely-watched figures from the American Petroleum Institute (API) released late on Tuesday revealed that US crude stock levels slumped by 3.9 million barrels to 283.8 million barrels last week amid the onset of cold temperatures in parts of the United States.
The figures contrasted sharply with the API figures released last week, which showed an increase of 3.4 million barrels in stocks from the previous week.
"The API figures have taken everyone by suprise," said Royal Bank of Scotland Financial Markets analyst Andrew Hartree. "The markets did not know that the cold snap would affect the level of the stocks.
"But consumers have been anticipating the cold by buying oil in advance and the market is going bullish."
The GNI brokerage agreed that a drop in temperatures in the United States and Europe was a key factor behind the spike in oil prices.
And GNI said that although temperatures in the United States and Europe are "beginning to moderate," forecasts predict that "they will not be back to normal before the weekend - even then ... normal seems a little chilly."
Oil prices fell back from 10-year high points last month after US President Bill Clinton had ordered the release of 30 million barrels of crude oil from the US strategic petroleum reserve (SPR).
But prices have surged upwards by almost 2.5 dollars a barrel this week amid renewed Israeli-Palestinian tension which analysts here say could disrupt supplies.
Saudi Arabia, the biggest oil producer in the world, has said that the kingdom would respond if Israeli Prime Minister Ehud Barak made any false moves in the escalating crisis in the Palestinian territories.
"Barak must think carefully before making the slightest intolerable step ... and no one can imagine that the Saudi kingdom and the entire Arab-Islamic nation would remain still," Saudi Crown Prince Abdullah bin Abdel Aziz warned on Monday in Riyadh.
However, the GNI brokerage said that the chance of tensions escalating to the point where they disrupted supplies was limited, but increasing nevertheless.
"Geographically, the two are far enough apart to lessen concerns and politically Israel would quickly lose what Western friends it had if targeted Saudi Arabia or other Gulf Arabs," GNI said. – (AFP)
© Agence France Presse 2000