LONDON – World oil prices soared to new record highs on Thursday after the Russian government barred oil major Yukos from accessing its bank accounts, threatening its ability to continue exports.
U.S. light crude jumped to high of $44.50 a barrel on the New York Mercantile Exchange (search), the highest level in the 21 years of U.S. oil futures trading, before settling at $44.41, up $1.58. London Brent futures rose to $41.30 — another record high — before easing to $41.10.
Markets have now shrugged off bearish news that pushed prices about a dollar lower in the previous session as news about Yukos (search) underscored the precariousness of global energy supplies. The company pumps 1.7 million barrels per day or a fifth of Russian production and 2 percent of world supplies.
Russia's Justice Ministry said on Thursday that permission granted by one bailiff, sent to Yukos only on Wednesday and made public by the oil firm, was illegal and therefore withdrawn.
The company has been battling bankruptcy, with tax debts of $3.4 billion. The new ruling means the company may not be able to use its cash to fund production and exports.
"All financial means entering the company's accounts now and in future, will be seized by the bailiffs' service and transferred to the budget to pay the tax debt," the ministry said in a statement.
Yukos had announced on Wednesday that bailiffs had allowed it access to its cash reserves to ensure short-term exports, thus helping knock prices off highs in the previous session.
"The main news of course is Yukos against a backdrop of general market worries," independent energy analyst Geoff Pyne said.
"The market thinks it is going to lose Yukos production and at the same time there is no sign that demand growth is slowing down in the second quarter as expected."
"There is enough news around to make people believe that OPEC (search) will not be able to raise production immediately," he added.
Prices have risen about a third this year but saw the relentless bull run disrupted on Wednesday when the OPEC producers' cartel reassured the market that it had 1 million to 1.5 million barrels of spare daily production to add to supplies if needed. It said it was able to tap these supplies immediately.
Fears have grown that a major glitch could arise in the supply chain, just at a time when energy demand is growing at the fastest pace in more than two decades and Asian economies continue to consume more and more oil. OPEC production is already running near the highest level since 1979.
Security concerns in Saudi Arabia and Iraq as well as uncertainty in Venezuela and Nigeria have sparked fears of inadequate supply. This has attracted speculative fund investors, who are partly seen as responsible for oil's relentless rise this year.
"It will take a lot of time for this extra oil to be delivered by OPEC," said Christopher Bellew of Prudential Bache brokerage in London. "The fears people had about supply interruptions still remain, because of the instability in Saudi Arabia and Iraq."
But former Saudi Oil Minister Sheikh Ahmed Zaki Yamani — the face of OPEC during the 1970s oil price shock — predicted that the current price scare would not last.
"Prices are already too high. There is additional supply available from OPEC — you will definitely see it," Yamani told Reuters in an interview. "Before the end of the summer we will see a lower price. Saudi Arabia has the key to do this."
Pyne said there were a few signals that stocks were starting to build in the United States. One of the triggers for Wednesday's fall was a report showing rises in gasoline inventories in the United States, unexpected as the country is still in the midst of the summer driving season.
This has sparked speculation that high fuel prices and sluggish economic growth has started to cool oil demand in the world's largest energy consumer.