Oil prices climbed to two-month highs yesterday as a strike in Venezuela, now into its third week, carved into supplies from the world's fifth largest exporter.
The cost of heating oil, traditionally a market leader during the winter months, soared to a 15-month high in the United States on fears of a supply squeeze.
International benchmark Brent soared 70 cents to $27.91 a barrel by late morning in London, its highest level since October 18. US crude futures jumped 48 cents to $28.92.
Dealers said the unexpectedly long strike in Venezuela, which normally accounts for about 14 per cent of US imports, would soon start draining inventories in the world's top consumer.
"The loss of short-haul heavy crude oil imports into the US market is now becoming significant," said J.P. Morgan's Paul Horsnell in his latest report.
"None of that effect is currently in the US weekly data, although it can be expected to depress imports in at least the next two weeks of data."
New York heating oil futures jumped 1.58 cents to 83.14 cents per gallon, their highest level since September 2001.
The cost of crude has risen by 20 per cent in the past month because of the Venezuelan stoppage and the threat of a US attack on oil-rich Iraq.
Venezuelan army commandos on Sunday stormed an oil tanker and arrested its striking crew as President Hugo Chavez vowed to break a two-week-old opposition strike that has paralysed the oil industry.
Two oil tankers loaded over the weekend, but 40 ships were still waiting on anchor off Venezuelan export terminals.
Attempts by Chavez to replace strikers with other workers have prompted shipping groups to warn that tankers attended by uncertified workers or pilots may incur insurance risks.
The strike has slashed oil output to less than a third of its normal 3.1 million barrels per day.
More than half a million protesters took to the streets of Caracas late on Saturday to demand the leftist leader resign and call early elections. Talks between government and opposition representatives have so far failed to negotiate an accord on the timing for elections.
The US Energy Department said last week it could lend crude from the national Strategic Petroleum Reserve to US oil companies whose refineries are suffering a shortage of supplies from Venezuela.
The OPEC nation exported almost 2.7 million barrels per day and supplied around 14 per cent of US daily oil imports before the strike.
The Venezuelan strike came against a backdrop of lower oil output from Middle Eastern countries and supply security fears related to Iraq.
The Organisation of the Petroleum Exporting Countries (OPEC) last week agreed to cut oil supplies as the cartel sought to restore market confidence in its discredited system of quota limits by raising official output targets.
Ministers said they were aiming for a cut of 1.7 million barrels per day (bpd), or seven percent, in their actual output.
Iraq, although a member of OPEC, is not party to the deal as it continues to export some two million barrels per day under United Nations supervision.
Dealers fear that this supply could be threatened by escalating tensions with the United States over weapons inspections.
Arms inspectors visited nine suspect plants on Sunday as US and British planes attacked what Washington said were anti-aircraft artillery sites in a no-fly zone in southern Iraq.
Iraq said the jets had hit civilian installations and that Iraqi anti-aircraft and missile batteries had fired back.