Oil surges to new high

Oil hit yet another new high above $141 a barrel this morning, as shares continued to fall in Europe and Asia following last night's heavy losses on Wall Street.

A barrel of US crude reached a new all-time high of $141.71 a barrel. London Brent Crude also hit previously unexplored heights, at $141.98 a barrel.

This came as the FTSE 100 dropped almost 50 points in early trading to 5,475.3 – its lowest level in three months – adding to the 147.9-point loss racked up yesterday.

Shares were also lower in France – where the CAC index shed 1.3% – and Germany.

The falls came after a grim day’s trading in Asia, where the China’s Shanghai stock fell to its lowest level for nearly 16 months as traders feared a hike in interest rates.

In Japan, where inflation hit a 10-year high, the Nikkei lost around 2%.

Analysts said that the markets are in nervous mood, following fresh indications that the long-running turbulence in the financial sector may still not be over. Yesterday the banks were hit hard after Goldman Sachs claimed that Citigroup would have to write off another $8.9bn (£4.5bn) in fresh sub-prime losses. This helped to wipe 3% off the Dow Jones index, which closed at 11,453 last night.

The anxiety was also fuelled by an extremely bearish research note published yesterday by Albert Edwards, Société Générale’s well-respected strategist. He predicted that the FTSE would fall as low as 3,000 points – just half of last year’s peak – before the current crisis is over.

Other analysts also believe that there is more trouble ahead, although their forecasts are not as bleak as Edwards’s.

Lucy Macdonald of RCM predicted that the second half of 2008 would offer “more of the same”, although probably without the kind of rescue packages and assistance which various central banks have offered this year in an attempt to keep the financial markets operating.