Supply fears see Brent break $50

BRENT crude hit $50 a barrel for the first time today, extending a relentless rise that has seen the oil price soar 65% this year.

Lingering worries about tight supplies ahead of the northern hemisphere winter drove Brent 51 cents higher on London's International Petroleum Exchange to $50.22 a barrel. Crude futures on the New York Mercantile Exchange hit a record high of $53.42.

Ongoing production problems in the Gulf of Mexico were blamed for the latest rally. About 475,000 barrels a day remains out of commission, nearly four weeks after Hurricane Ivan battered the region.

Unions in Nigeria, which produces about 3% of the world's oil, were also set to begin a four-day general strike.

China has led rapid growth in world oil demand this year, eroding spare production capacity in OPEC nations and leaving the global market a tiny supply margin to cope with disruptions.

Saudi Oil Minister Ali al-Naimi said price levels were unjustified and should come down after November's US presidential elections.

'There is no justification for it to be where it is. This is a political year and this may have some influence,' he said.

Naimi reiterated that top world exporter Saudi Arabia could pump an extra 1.5m barrels per day if required. Oil traders say that extra supplies of the kingdom's high-sulphur crude can do little to help.

Industrialised nations lack high-tech refinery capacity to process OPEC's low-quality crude into transportation and heating fuels. This has forced refiners to bid up prices for higher quality supply from Africa and the North Sea.

'As winter approaches, fears of insufficient supplies to meet heating demand are driving a strong push for sweet, distillate-rich crudes in the hope of building a sufficient stock cushion,' said PFC Energy in a report.

Oil importers are growing increasingly edgy about the impact on their economies. '(Oil) is creating headwinds for the otherwise very strong economy,' U.S. Treasury Secretary John Snow said at the weekend.

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