THE spectre of spiralling oil prices has raised concern that North-East companies are facing a difficult trading period.

The cost of crude surged to $43.17 a barrel in New York yesterday as investors fretted over a stand-off between Russian authorities and its largest oil company, Yukos.

Some analysts are predicting that figure will rise to $50 a barrel by the end of the year.

Barclays Capital analyst Kevin Norrish said: "The stage is set for prices to continue to move higher. It is difficult to see what can stop that other than a fall in demand."

Andrew Sugden, director of policy at the North-East Chamber of Commerce, said: "From a business perspective, the big worry is that rising oil prices have an immediate impact on transportation costs.

"Not only is this bad news for transport and haulage firms, but it very quickly has a knock-on effect down the supply chain, with producers having to pass on increases to their customers.

"For North-East companies locked into long-term fixed supply contracts, this is a real issue in the long-run.

"Unfortunately for businesses, we seem to be caught in the middle of a process caused by ongoing problems in Russia and the Middle East."

Alan Hall, regional director of the Engineering Employers' Federation, said rising oil prices would hit raw material costs and would particularly affect companies dealing in oil-derivative products.

But he questioned analysts' predictions that prices would spiral. He said: "I am personally unconvinced that prices will reach $50 a barrel. I think there is huge nervousness in the oil market. But, even if Yukos were to go bust, there are other people that would rush to fill the gap."