Saudi Arabia was on Monday forced to pledge an increase in the supply of crude as threats to production around the globe pushed the price of oil to within $3 of the all-time high reached after Hurricane Katrina last August.
Amid concerns that the renewed increase in the cost of energy could affect growth in the world economy, the Organisation of Petroleum Exporting Countries (Opec) also sought to calm the markets by emphasising that it has no plans to limit output at its meeting due to be held in Vienna at the end of the month.
The announcements came as the cutting of gas supplies from Russia to Georgia intensified concern over the vulnerability of supply triggered by Iran’s nuclear stand-off with the West, a shutdown of production in Nigeria and continuing sabotage threats to Iraq’s oil facilities.
Prices surged to more than $69 in Far East trading on Monday, but later slipped back after the reassurance given by the world’s biggest producer. Oil futures fell in New York, with crude for March delivery down by 38 cents to $68,10. Brent crude was trading at just more than $66 a barrel in London, down 34c.
”Fundamentals today are in excellent shape and inventories are at reasonable levels, supply plentiful, demand is well met by supply,” said the Saudi Oil Minister, Ali al-Naimi. ”There is no reason why prices should be rising — other than these tensions [over Nigeria and Iran].”
Al-Naimi also said Riyadh is ready to produce more oil, if needed, and that Opec is likely to keep output steady when it meets on January 31 in Vienna.
Traders also took profits after a near-20% surge in crude prices during the past month culminated in a gain of more than $4 last week, despite warm United States weather and hefty inventories.
Oil prices peaked at $70,85 last August when US production from the Gulf of Mexico was shut down by Hurricane Katrina, but analysts said the threat from Iran to resume industrial-scale uranium enrichment if it is referred to the United Nations Security Council could see the record challenged over the coming months.
”Short term, there are various cross-currents in the markets, and it will be hard to get a read on where prices will go this week,” said Ed Meir, an analyst at Man Financial. ”There apparently is still more firepower that funds have at their disposal to move markets even higher.”
The calmer mood in the oil market helped Wall Street to steady following Friday’s fall of more than 200 points — the largest one-day drop in three years. The Dow Jones industrial average was up just more than 20 points in early trading at just less than 10 700 points. — Guardian Unlimited Â