Supply fears push up oil prices

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Oil prices rose above $71 a barrel on fears over low fuel stocks in the US and instability in the Middle East.

Brent crude, deemed a key indicator of the oil market, rose 27 cents to $71.63 after a 10-month high at $71.88. Sweet crude rose to $68.12 in New York.

Analysts are concerned that old US refineries are not able to meet demand. Stocks are also unusually low.

Instability in Gaza has raised concerns over wider conflict in the Middle East, which supplies a quarter of world oil.

Low stocks

A number of geopolitical factors have helped increase oil prices recently, including tension between the West and Iran over its nuclear programme as well as disrupted supply in Nigeria.

To aggravate the situation, US petrol inventories are around 6% lower year-on-year.

The drop comes as demand peaks in the US, with the so-called driving season beginning - when car usage increases as Americans take holidays.

"Gasoline is very strong because refinery runs are at 89% and stocks are below average," said Christopher Bellew, senior vice-president at Bache Commodities.

While sweet oil in New York is trading below the record reached last July of $78 a barrel it is considerably higher than it was at the start of the year at $50.

The $78 record was reached against a backdrop of conflict in Lebanon, which raised concerns over a potential knock-on impact on the region.