Oil prices head for 21-year highs

OIL prices are on course to hit 21-year highs again over the coming weeks as fears grow about the uncertainty of supply from the world's major producers.

US crude futures are already at $41 a barrel for September and concerns are now growing that there is not enough oil around to satisfy soaring demand in the US and China.

Rob Laughlin, analyst at GNI Man Financial, said: 'The funds that have taken a back seat recently are in the market again. We could easily reach the highs we saw a month ago.'

US crude for August delivery dipped 29 cents today to $40.96. But this is just $1.50 off the $42.45 struck last month, the highest futures price in New York since 1983. Brent fell 40c to $37.60.

Markets are worried about supply disruptions given the wafer-thin spare capacity currently within Opec, the cartel that is lifting its output quota by another 500,000 barrels at the start of August.

Terrorist attacks have made Iraqi production unreliable with little flowing from the north of the country. David Thurtell, analyst at Commerzbank, said: 'The terror premium is still there.'

Opec is pumping out nearly 28m barrels a day, far above its revised quota, but despite the high oil price worldwide demand is soaring.

State-controlled Chinese refiner Sinopec today revealed that its oil processing volume jumped by 19% in the first half of the year. Sales of refined oil products including petrol rose 29% to 45.5m tonnes.