SPIRALLING oil prices may affect profit margins in the region's chemical industry, an expert has warned.

Oil prices were once again at near record highs last night as fears of unrest in Venezuela and disruption in Iraq sparked fresh concerns over supplies.

Ian Click, of the Teesside Chemical Initiative, said if prices remained as they were, it could begin to affect the region's chemical companies, many of which manufacture oil-based products.

Companies could either absorb the rising costs, he said, or pass them on to customers.

But overseas competition from China and the Far East means chemical companies in the West have to maintain a competitive edge. Absorbing the costs of rising oil prices could hit company profits.

He said: "There are no specific crises or anything like that.

"You have to remember these companies are used to feedstock prices rising and falling.

"But if oil prices continue to rise, they will have to choose between passing some costs on to their customers or footing the bill themselves.

"There will be pressure on margins until they are able to budget for the higher product prices to offset that. It cannot make life easier for the companies involved.

"But they work on different contracts for their feedstocks, some short-term and some long-term. In the short-term, oil prices rise and in some cases they will be able to relate the prices of their products to the feedstock price."

Rises in oil prices will cause further anxiety for motorists, who have been warned to expect another 1p on petrol prices this month.

The latest surge in the cost of crude came as heavy fighting in southern Iraq renewed fears of a disruption of the country's oil production.

The possibility of unrest in Venezuela, where President Hugo Chavez faces a referendum this weekend, also weighed on markets.

Analysts said a defeat for Mr Chavez could disrupt oil shipments from Venezuela, which provides between 12 and 13 per cent of US imports.

Bruce Evers, oil analyst at Investec Securities, said this could have severe consequences. He said: ''It is going to be a very nervous weekend for oil traders."

He said forecasts suggested the cost of crude could move higher.

Fears of terrorist attacks, disruptions to Iraqi crude exports and financial troubles at Russia's largest oil producer, Yukos, have all fuelled soaring prices in recent days.