LONDON, Aug 7: Crude prices spiked on Monday, soaring above $78 and close to a record high in London after a pipeline spill forced oil major BP to start closing production from a key oil field in Alaska.

The move came as prices were already on the boil because of supply concerns in major producing countries Iran and Nigeria, violence in the Middle East and strong global demand.

In London, the price of Brent North Sea crude for September delivery shot up to $78.08 per barrel, the highest level since July 17 when it struck an all-time peak of $78.18 as violence erupted between Israel and Hezbollah in Lebanon.

Later on Monday, the contract stood at $77.86 in electronic deals, a rise of $1.73, or 2.3 per cent from Friday’s close. New York’s main contract, light sweet crude for delivery in September, surged $1.74 to $76.50 per barrel in pit trading.

New York crude hit an all-time high of $78.40 on July 14.

“The reason for the move up in price is Sunday’s announcement by BP that it is shutting down part of its Prudhoe Bay field in Alaska, the largest in the US,” Barclays Capital analyst Kevin Norrish said. “Tensions surrounding the Middle East situation have also worsened over the weekend,” he added.

BP, based in Britain, said late on Sunday that it had begun closing the Prudhoe Bay field after discovering a small pipeline spill in a move that will slash production by 400,000 barrels per day (bpd).

Prudhoe Bay accounts for about half of Alaska's total output and around eight per cent of total production in the United States, according to the US Department of Energy. The US government said on Monday that it would take a “serious look” at requests from refiners to tap the nation’s emergency oil stockpile owing to the BP shutdown, which comes in the wake of a pipeline leak in Prudhoe in March.

“There is clearly a lot of sensitivity within BP management over its record in Alaska and the sensitivity may be reflected in a heightened degree of caution over the latest findings,” Norrish said.

“Lost production is estimated at 400,000 bpd and BP has not announced a restart, though shutting down the facility is a major step and suggests it is likely to be off-line for some time,” he added.

Global Insight analyst Simon Wardell said that while it would be more than a few days before output was restarted, “the worst-case scenario appears to be a matter of weeks rather than months”.—AFP