NEW YORK, Dec 31: Oil prices charged to a record in 2005 and could rise even higher in 2006 as the United States implements clean fuel rules and world energy demand remains strong, experts said on Friday.

The outlook means more headaches for businesses already squeezed by soaring energy bills, and consumers who have been forced to pay up for gasoline and winter heating fuel.

US oil reached highs of nearly $71 a barrel in August from $43 at the beginning of the year after a wave of hurricanes slammed US Gulf Coast oil and gas infrastructure, cutting a quarter of the nation’s fuel production.

Prices have since receded as the industry made strides in its recovery, but the new year may bring new price-supporting supply constraints, experts said.

Tougher US sulphur requirements for gasoline and diesel could cut supplies as refiners shut plants to revamp units, and foreign suppliers find other markets with less stringent regulations, slashing US imports.

“Refiners are already going to be feeling a bit of a pinch in their ability to provide supply, and importers as well,” Jamal Qureshi, analyst at PFC in Washington said.

Refiners must reduce sulphur content in gasoline starting Jan 1 according to new regulations from the US Environmental Protection Agency, while ultra low sulphur diesel requirements will begin to be phased in from June. Both will help drive up prices, experts warn.

A recent Reuters poll of analysts predicted US oil futures will average $57.34 a barrel next year from around $57 a barrel in 2005.

Despite expectations of tighter supply and high prices, experts say demand growth will remain resilient. Analysts had feared the 2005 price surge could dampen buying, especially in the Asian and US markets.

“A lot of factors that existed in 2005 will continue in 2006. We expect to see demand stay relatively strong,” Joanne Shore, analyst at the US Energy Information Administration, told Reuters.

While some companies have beefed up their refineries in response to high fuel prices, the new capacity is not expected to match rising demand in the world’s largest oil consumer and will continue to support prices, analysts said.

“There have been attempts this year to solve the bottleneck in the refinery part of the energy equation. That is still not resolved,” said Jason Schenker, analyst at Wachovia Bank in Charlotte, North Carolina.

Oil cartel Opec, which controls around 40pc of world crude exports, pumped nearly full out this year to build stocks and help bring prices down from record peaks.

But analysts say the group may trim output levels next year to prevent growing inventories from depressing prices, and some Opec members have signalled they want to lower production limits at its Jan 31 meeting.

“Opec is going to have to go back to some supply management again if they are going to hold a (price) floor. It should be easy for them to manage, it’s not like they have to cut a lot they will still be at high output levels,” PFC’s Jamal said.—Reuters