Oil: Sharp rise in prices

Oil prices approached US$75 a barrel on Wednesday as US crude stocks fell more sharply than expected and as the International Energy Agency forecast accelerating demand growth in 2007 and beyond.

Prices also found support in Iran's defiant stance to Western demands for limits to its nuclear ambitions.

US crude futures settled up 79 cents to US$74.95 a barrel, within a dollar of last week's record. London Brent rose 72 cents to US$74.39 a barrel.

US crude oil stocks slumped 6 million barrels last week as imports fell nearly a million barrels per day. The drop in inventories was five times larger than the 1.2 million barrels forecast among analysts polled by Reuters.

Petrol demand from the world's largest energy consumer remained strong. Motorists have consumed 1.7 per cent more petrol in the past four weeks as they did in the same period a year ago.

"The very big draw on crude stocks is a surprise," said Phil Flynn, analyst at Alaron Trading. "Petrol demand remains very strong ... We have a good chance of hitting new highs here." The United States consumes over 40 per cent of the world's petrol, so even a small rise in demand can push oil prices higher. Robust US petrol demand helped push crude futures to a record last week of US$75.78 a barrel.

The data covered the four-day US vacation for July 4. The weekend is the biggest vacation travel weekend of the summer driving season, when annual petrol demand peaks.

Petrol stocks fell 400,000 barrels, compared to a forecast decline of 100,000 barrels.

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High prices have stemmed the world's voracious appetite for oil a little, but growth in demand is expected to rise more quickly through 2011 than it did in the past decade, the Paris-based International Energy Agency said on Wednesday.

"You are still seeing high prices restrain demand," said Lawrence Eagles, head of the IEA's Oil Industry and Markets division.

"But there are a number of large developing countries such as China that have reached a threshold of income in which oil demand starts to take off." The IEA, adviser to 26 industrialized countries, predicted the world would need 1.57 million barrels per day more oil to fuel economic growth in 2007, up from annual growth of 1.21 million bpd this year.

The US on Wednesday stepped up pressure on Iran, warning it faced UN Security Council action for failing to respond quickly enough to incentives offered by major powers to stop Tehran enriching uranium.

Iran resisted pressure on Tuesday, insisting it would not be rushed into an answer at talks with the European Union.

Iran has said it will respond in late August. The US, which has accused Tehran of secretly working to build nuclear weapons, has said it wants a clear Iranian response before the Group of Eight rich nations meet this coming weekend.

- REUTERS