Yukos warning sparks US oil price rise

US OIL prices look set to smash back through the $42 a barrel mark today as panic grips the sector following Russian giant Yukos's warning that it could be bankrupt within a month.

In a fresh twist to Yukos's ongoing tax battle with the Kremlin, it said Russian authorities would bring about its collapse if they press ahead with plans to seize its main Yuganskneftegaz subsidiary.

Yukos is Russia's main oil producer, and the warning raised fresh fears about a supply squeeze in world markets.

US light crude for September delivery was up 10c at $41.45 a barrel in futures trading today after a 78c hike yesterday. Brent futures were 14c higher at $38.15.

'It's Yukos,' a Tokyo-based broker said. 'Its possible bankruptcy has been expected, but the market is very nervous about the resulting cut to exports.'

Yukos was plunged into chaos last October when its founder and chief executive Mikhail Khodorkovsky and his main associate Platon Lebedev were arrested on fraud and tax evasion charges.

It hoped to use its stake in Chelsea FC owner Roman Abramovich's oil empire Sibneft to settle a $3.4bn (£1.8bn) tax bill for 2000.

South Korean refiner LG added to the gloom by warning that its joint venture refinery with ChevronTexaco may not be able to meet export commitments next month after a crippling strike by workers.