European gas oil prices set a new high above $1,000 a tonne on Tuesday, boosted by a fire in a key European refinery last week and unexpectedly strong demand. Power blackouts in South Africa, Chile and China have forced many companies to run diesel generators to offset electricity supply interruptions, while a harsh winter in south-east Asia has boosted heating oil demand. ICE April gas oil futures hit a record $1,017 a tonne on Tuesday, up 1.3 per cent on the day and 21.2 per cent since the start of the year. The rally in gas oil is a reaction to growing tightness in the supply of the family of petroleum products known as distillates: gas oil, diesel and jet fuel. Francisco Blanch, commodity strategist at Merrill Lynch, said: "The distillate market has tightened on a combination of robust demand and limited supplies. "Distillate inventories have come down very rapidly in OECD economies in recent months.' Tightness in distillate markets has been reflected in refiners' profit margins, known as crack spreads. European gas oil crack spreads have hit record levels while US heating oil cracks have also shifted dramatically higher. Mr Blanch's long-held view is that the increase in crude oil prices in recent years can be linked to global refining bottlenecks. He said: "Diesel demand [growth] has completely outpaced [that of] gasoline across all main OECD regions. Unfortunately, many refiners were not ready for this structural shift, and have been unable to switch between the two fuels.' Strong economic growth in emerging markets has been a key driver of the underlying structural changes in the global distillates market. China and India are soaking up a larger share of diesel and gas oil, because of rising demand for air and road transport. The Middle East has also seen phenomenal growth in distillate demand. Barclays Capital says the increase in Chinese oil demand this year will exceed 2007, even assuming a significant slowdown in GDP growth to 8.8 per cent in 2008. Barclays says more power shortages in China will lead to higher diesel demand and the investment bank also expects fewer significant shortages of oil at the retail level this year. Mike Wittner, global head of oil research at Soci