Crude oil hovers near price peak

OIL prices hovered just below record highs today as the crisis at Russian oil giant Yukos heightened fears about a supply crunch in energy markets.

US crude fell 25 cents to $42.65 a barrel after yesterday hitting $43.05, the highest in the contract's 21-year history. Brent slid 28 cents to $39.25 after surging almost $1 to a 14-year high $39.68 yesterday.

The latest price leap came after Russian authorities ordered Yukos, the country's biggest producer, to stop selling crude. The Kremlin wants Yukos to cough up billions of dollars in unpaid taxes.

It was unclear whether the order might force Yukos to halt shipments, or simply bar it from signing new supply contracts. Oil brokers said Baltic and Black Sea loadings of Yukos crude were going ahead as normal.

Although Yukos represents only 2% of global oil production, the crisis coincides with a chronic lack of spare capacity. Producers' cartel Opec is pumping at more than 95% of its capacity, the highest for more than a quarter of a century, to meet demand.

Nariman Behravesh, chief global economist at World Markets Research Centre, said: 'Oil markets are in the most precarious situation since the early 1980s and remain the single biggest threat to the global recovery over the next couple of years.'

He estimated 0.3% would be knocked off global growth in 2005 and 2006 if oil prices stay in the $35 to $40 range.

David Thurtell, commodity strategist at Commonwealth Bank of Australia, said the oil price could hit $46 in the nearterm, although such a level was likely to prove short-lived.