Oil prices continue surge past $40 benchmark

OIL prices yesterday surged to a new 13-year high of more than $40 a barrel over concerns that OPEC may not pump enough oil to meet world demand.

US light crude climbed to a peak of $40.38 a barrel, less than $1 off the $41.15, all-time high for New York crude futures. That figure was reached in October 1990 following Iraq’s invasion of Kuwait. London Brent crude was up 14 cents to $37.50 a barrel.

Importing nations are increasingly worried about the economic fallout of higher energy costs. The increase has come during the second quarter, when world oil demand is at its lowest seasonal ebb, raising concerns about prices later in the year as demand rises.

OPEC President Purnomo Yusgiantoro said the cartel is already pumping more than two million barrels daily in excess of official supply limits in a bid to cool world oil prices.

“We have not discouraged our members from producing more because we want to do everything we can to stabilise prices,” Mr Purnomo said.

His comments underline concerns in the market about how much extra oil OPEC will release should it decide to lift production quotas when ministers meet next month in Beirut. Ministers are considering raising production limits from 23.5 million barrels per day (bdp) after Saudi Arabia proposed producing at least 1.5 million bdp more.

A senior Saudi oil official said yesterday that the kingdom stood ready and able to boost oil output to meet global demand growth, but only after consultation with fellow OPEC exporters.

The International Energy Agency (IEA) said OPEC holds around 2.5 million bpd of spare capacity, but warns that consumption is growing at its fastest rate since 1988.

Oil prices have rocketed nearly $8, or 24%, since the start of the year as stronger than expected energy consumption among industrialised nations bolsters growing demand in China.

Supply from outside the OPEC countries is failing to meet growth expectations, despite rising volumes from Russia and that raises the requirement on OPEC for extra crude, the IEA’s Oil Market report said.

Supply security worries from the Middle East have also fired up prices. Iraqi oil exports from Basra are still reduced to 1.1 million bpd after pipelines were sabotaged at the weekend.