Crude oil surged past $40 a barrel in New York this evening, with orders for June delivery priced at $40.10 on the New York Mercantile Exchange. It was the second time in a week that the main oil price in New York topped $40.
On Friday, the futures price briefly hit $40 a barrel before settling back to close at $39.93. That was nonetheless the highest price since October 1990 when Iraq invaded Kuwait ahead of the 1991 Gulf War.
The rebound came on the back of doubts that top world exporter Saudi Arabia's call for a rise in OPEC quotas would add much actual supply to a tight international market.
Saudi Arabia triggered a slump in prices yesterday by proposing that the OPEC cartel raise official production limits by at least 1.5 million barrels per day (bpd) when ministers meet on June 3 to review policy. Saudi Oil Minister Ali al-Naimi said the increase was necessary to cool oil prices that threatened to dent global economic growth.
The cost of crude has jumped 20% this year. OPEC has come under strong pressure from major importing nations to bring down oil prices. The International Energy Agency, which advises 26 industrialised nations on energy policy, welcomed the Saudi proposal but said the move was not enough to bring down runaway oil prices.
OPEC is already pumping some two million bpd above its formal 23.5 million bpd output ceiling and the IEA questioned whether an increase in formal quotas would actually translate into higher supply.
Algerian Energy Minister Chakib Khelil said today that Saudi Arabia is the only OPEC producer with the spare production capacity to implement the proposed increase in output quotas.
Strong demand in China, low US fuel supplies and an escalation of violence in the oil-rich Middle East have fuelled oil's price rise.
