The aim of traffic engineering is to optimise network resource utilization. Although several works on minimizing network resource utilization have been published, few works have focused on LSR label space. This paper proposes an algorithm that uses MPLS label stack features in order to reduce the number of labels used in LSPs forwarding. Some tunnelling methods and their MPLS implementation drawbacks are also discussed. The algorithm described sets up the NHLFE tables in each LSR, creating asymmetric tunnels when possible. Experimental results show that the algorithm achieves a large reduction factor in the label space. The work presented here applies for both types of connections: P2MP and P2P