Oil prices surge on supply fears

25 October 2007

Oil prices surged on Wednesday after a US government report revealed the country's stocks of crude and heating oil have fallen dramatically.

The weekly update from the Energy Information Administration (EIA) showed that the stockpile of crude had fallen by 5.3 million barrels, while the distillate inventory, which includes heating oil, dropped by 1.8 million barrels.

As a result, US crude gained $1.83 to close at $87.10 a barrel, while London Brent crude settled up $1.52 at $84.37.

The upward trend continued during early trading on Thursday as US crude climbed to $87.95 and London Brent crude reached $84.91.

Dariusz Kowalzcyk, an analyst with CFC Seymour Securities, told AFP that the EIA's report supported fears that there could be supply problems during the high demand of the northern hemisphere winter.

"The declines in crude oil and products were quite deep and unexpected because the market was hoping for a rise. This highlights the tightness of the physical supply," explained Mr Kowalzcyk.