OIL prices rose above $60 a barrel yesterday after an explosion at one of BP's refineries in the US.

The blast happened at the company's Texas City plant on Thursday night.

It is the second explosion to hit the refinery since March, when 15 people were killed.

It also comes only weeks after a hurricane apparently damaged one of BP's oil platforms in the Gulf of Mexico.

Crude prices and BP's shares rose as the blast and a blaze at another oil company's refinery in Louisiana prompted fears that production may not be able to meet US demand in coming months.

The March 23 blast, which happened in a unit that boosts the octane level of petrol, killed 15 contractors and injured more than 170 workers.

Texas City, one of five BP refineries in the US, processes 433,000 barrels of crude oil a day and three per cent of US petrol.

A spokesman said: "We are talking about a minimal impact on production output of petrol."

On July 12, BP shares fell after Hurricane Dennis destabilised the company's Thunder Horse platform, in the Gulf of Mexico, 150 miles south of New Orleans.

Analysts said investors had feared that damage to the platform may delay plans to start pumping oil from it at the end of this year and BP confirmed this week that there was likely to be a delay.

Interruptions to supplies, such as refinery blackouts and weather-related shutdowns, inflated the price of crude last year and much of this year. Oil prices are more than 40 per cent higher than they were a year ago, but would need to reach $90 a barrel to match the all-time, inflation-adjusted high set in 1980.

In its latest short-term energy outlook, the US Department of Energy said worldwide spare production capacity had recently fallen and could decline from last year's levels over the next two years if world oil demand grew more rapidly than expected.