Oil prices break new ground

Light, sweet crude for August delivery reached 142.26 dollars on New York commodity markets before settling slightly. Just a few hours earlier it breached the 141 dollar level.

The spikes followed Thursday's five dollar rise above the 140 dollar mark amid predictions from oil cartel Opec that prices could balloon further this summer. Crude oil is now nearly 50% more expensive than at the start of the year.

In London, Brent crude also hit a record 141.06 dollars a barrel. The FTSE 100 Index, which dropped nearly 3% on Thursday as oil prices soared, was down nearly 0.5% on Friday. Stock markets in Paris and Frankfurt were also down nearly 1%.

Further oil price rises, which impact the cost of a host of industrial raw materials as well as petrol and diesel, will add more upward pressure to already soaring inflation and make it more likely that interest rates are increased.

They are also likely to spell more pain for UK motorists, as recent higher prices have yet to filter through to the pumps.

Earlier this week the AA revealed that average diesel prices in the UK hit £6 a gallon for the first time - 35% dearer than a year ago.

Opec president Chakib Khelil also shook the markets yesterday after forecasting the cost of crude would rise to between 150 dollars and 170 dollars a barrel this summer.

The grim forecast came as calls mounted for the group to increase oil production and help reduce soaring fuel inflation.

Gordon Brown is among a raft of western leaders to have put pressure on Opec as inflation rockets on the back of higher oil and energy bills.