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Oil Prices Hit New High - 2004-08-19

World oil prices advanced again Thursday, rising to more than $48 a barrel.

The price of this key commodity has risen by about a third just since the beginning of July.

In London, oil closed at $43.80 a barrel, while in New York oil closed at $48.70, up three percent.

The record prices were spurred on by renewed violence in Iraq, which some fear could cause an increase in sabotage in the country's oil infrastructure. There is also a lingering concern about the political uncertainty in Venezuela, the world's fifth largest oil supplier. Analysts are also worried about the fate of Russia's largest oil exporter, Yukos, which is engaged in an ownership dispute with the government.

Oil demand continues to be strong, as rapid economic growth has boosted exports to Japan, China, India and the United States. The U.S. energy department this week reported a bigger than expected drop in U.S. oil inventories.

Stephen Bradley, chief economist at J.P. Morgan bank in Australia, says he is not convinced that the high price of oil will slow global growth.

"Let's assume that oil prices spike to $50 next week, then that would have a major negative impact on consumer spending," he said. "But if prices move from say, $46 to $50 over the space of six weeks, I think that would have a negative impact, but not as significant an impact, because, as you said, consumers do get to used to it."

J.P. Morgan is forecasting that oil prices are likely to decline to $35 to $38 a barrel by the end of the year. The International Monetary Fund has predicted that oil this year would average $32 a barrel.