Crude prices surged upwards in London and New York after the British Embassy in Riyadh said that militants could mount attacks in the Kingdom.

“There are credible reports that terrorists are in the final stages of planning attacks,” an advisory notice posted on the embassy’s website said.

The notice, which was echoed by similar warnings from the Australian Government, which told its nationals to avoid travel to Saudi Arabia, increased markets’ worries over the security of the Kingdom’s vast network of oil installations.

In New York, benchmark prices for US light crude rose by 2.5 per cent to an intraday high of $63.80, setting a new record, before edging lower.

In London, benchmark Brent crude also set records, with prices on the International Petroleum Exchange at one point rising by $1.73 a barrel, or 2.8 per cent, to $62.80.

Although there was no indication that the Saudi security threats were directed at the Kingdom’s oil industry, fears over the implications were raised by the political aftermath of the death of King Fahd and the succession of King Abdullah.

The warnings came just a day after Washington had closed the US Embassy in Riyadh and consulates in Dhahran and Jeddah yesterday and today “in response to a threat against US Government buildings”.

The steep increases in the cost of oil were despite further efforts by the Opec oil cartel to rein-in prices. Opec said on Friday that it had increased its oil production by 300,000 barrels a day over the past two weeks.

Oil markets appeared largely to have disregarded the move, as the security fears in Saudi Arabia were compounded by concerns over a persistent world shortage of refinery capacity, which has been made worse by the closure of several refining facilities. ConocoPhillips was the latest oil group to suffer such a shutdown, with parts of its operations at Borger, Texas, closed by operational problems.

Estimates from Barclays Capital suggest that as much as 3 per cent of refinery capacity in the United States has been hit by similar shutdowns, helping to send American petrol prices to record levels.

In Britain, the latest jump in oil prices also spells further misery for motorists. Average petrol prices already stand at about 90p per litre and the AA Motoring Trust said last week that prices in some areas had broken the £1 a litre barrier.

Luke Bosdet, a spokesman for the trust, said that British motorists were now spending an extra £7.5 million a day on their fuel, compared with the cost to their pocket in January.

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