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Oil Prices Jump 2 Percent as Venezuela Dents U.S. Supply

World oil prices opened the year with a two percent leap on Thursday as a month-old Venezuelan strike cut deeply into U.S. imports and pushed crude oil stocks down to 26-year lows.

International benchmark Brent crude oil traded in London climbed 61 cents to $29.27 per barrel, up 2.1 percent on the previous close.

U.S. crude futures gained 52 cents to $31.72 a barrel, about $2 shy of a two-year peak hit earlier this week.

The latest inventory report by the American Petroleum Institute showed crude oil stocks plunging three percent last week, versus an expected one percent drop, as shipments from Venezuela all but dried up.

Imports of crude oil and refined products such as gasoline fell by 1.8 million barrels per day versus the previous week.

Meanwhile, U.S. residential heating oil prices soared 4.4 cents over the last week in the biggest weekly jump so far this winter heating season, the Energy Department said Thursday.

The latest heating oil price -- $1.407 a gallon, based on a survey by the Energy Department's Energy Information Administration (EIA) -- is up 25 cents from a year ago.

The national price for heating oil has risen 8.4 cents in the last two weeks.

Mike Rothman of investment bank Merrill Lynch said U.S. tank levels were now 50 million barrels below normal levels for this time of year.

"In fact, inventories ended 2002 at their lowest (year-end) level since we began tracking the data in 1984," he added.

Venezuela normally supplies 13 percent of U.S. imports, but exports ground to a virtual halt in early December because of an opposition strike aimed at ousting President Hugo Chavez.

The decline in U.S. inventories brought crude storage levels close to a 26-year low struck in October when storms disrupted oil operations on the Gulf Coast.

The stocks report, released after the close of trade on Tuesday, is closely monitored by traders as a snapshot for demand and supply in the world's top energy consumer.

Both New York and London were closed on Wednesday for the New Year holiday.

The strike in Venezuela, the world's fifth largest oil exporter, has been running since December 2.

Chavez, a OPEC price hawk, has denounced the strike as a coup attempt and tried unsuccessfully to restore oil operations using troops and replacement staff.

The Organization of the Petroleum Exporting Countries, dominated by Middle Eastern states, has offered to make up any shortfall due to Venezuela, which is OPEC's third largest producer.

But supplies from the Middle East take six weeks to reach U.S. shores compared with about five days from Latin America.

Oil prices averaged $25 for Brent and $26 for U.S. crude last year, very slightly higher than the 2001 average but $5 below 2000 when OPEC kept a firm grip on exports at a time of low inventories and little spare output capacity.

Some economists blame OPEC's high-price strategy since the beginning of the decade for bringing global economic growth to a virtual standstill and concerns are rising that crude's latest run-up may dampen growth this year.

"High oil prices don't help economic recovery and it's clearly not what the world needs now," said John Hirjee, senior energy analyst at Deutsche Bank in Melbourne.

Leading OPEC powers, including Saudi Arabia, have offered to lift oil output if prices remain high until mid-January.

The 11-member cartel has an informal price mechanism under which it can raise quotas if its reference price exceeds a target range of $22-$28 a barrel for 20 consecutive working days.

OPEC's reference basket of seven crude oils stood at $29.85 on Tuesday, the 11th consecutive day above $28. 

Reuters and the Associated Press contributed to this report.