World oil prices gave up initial gains to slide in volatile trading today after oil kingpin Saudi Arabia said it was ready to 'immediately' increase oil output by 1.3 million barrels per day.
Brent North Sea crude oil for September fell 31 cents to $40.97 dollars a barrel in late trading in London. New York's light, sweet crude for September delivery slid 82 cents to $43.70 in early deals, a day after surging to the record high level of $45.04.
Prices began falling after Saudi Oil Minister Ali al-Nuaimi said the Gulf state was ready to hike production to cope with hot world demand.
'The kingdom is well prepared to meet all the requirements of the international oil companies if they need additional volumes, relying on its surplus production capacity of more than 1.3 million barrels daily, which could be used immediately if required,' Nuaimi said.
'Saudi Arabia, in collaboration with the other OPEC countries endeavors to ensure the stability of the international oil market and prevent oil prices from escalating in a way that may negatively affect the world economy or oil demand,' he said.
He added that Saudi Arabia's average production rose to more than 9.3 million barrels per day during the past three months.
Nuaimi's comments came shortly after the US government announced that US commercial crude oil and gasoline inventories drained lower in the week to August 6.
US crude oil inventories fell by 4.3 million barrels to 294.3 million last week, the Energy Department said. Stocks of petrol dropped 1.8 million barrels to 208.3 million but distillates - mostly diesel and heating oil - gained 1.3 million barrels to 122.5 million.
World oil prices had earlier risen, as the market chased fresh record high levels and shrugged off a warning by the International Energy Agency that the market is showing 'irrational exuberance'.
'The market is tight, production and infrastructure capacity is less than desired and uncertainties continue to weigh on the market,' the IEA said in its monthly review of global energy markets. 'But, does this justify 45-dollar oil? Current oil prices are a concern and are causing economic damage,' it added.
Helping to push prices higher earlier today was the news that major producer Iraq had halved its crude exports after the closure there of a southern pipeline earlier in the week because of a militia threat of attack.
Russia's embattled oil giant Yukos meanwhile remained in the spotlight after announcing that creditors had declared it in default of a $1.6 billion loan as the country's largest producer hurtles down a path to bankruptcy.
The announcement came hours after a top energy ministry official warned that Yukos could be forced to shut down production, a move he said would impact Russia's economy and global energy prices already hovering at historic highs.
Yukos has already been billed for back taxes from the year 2000 and penalties totalling $3.4 billion, and that figure could balloon to around $10 billion if the company receives similar bills for the years 2001-2003.
