Saudi move eases oil price jitters

Oil prices pulled back from record highs tonight after Saudi Arabia said it was able to pump an extra 1.3 million barrels a day.

The comments from the kingdom’s oil minister Ali Naimi eased jitters among traders as the price of a barrel of crude in New York fell from last night’s 21-year record of $45.04 (€36.80) to $44.40 (€36.60).

Earlier today, the prospect of tropical storm Bonnie hitting the Florida coast - a key production area – had kept prices near to record levels.

But pressure eased when the world’s largest oil producer said output could be increased to meet extra demand. An extra 1.3 million barrels would be a rise of almost 14% on the country’s current daily output of 9.3 million.

The latest fluctuation in prices came as the International Energy Agency said oil cartel OPEC’s spare capacity shrank to just 600,000 barrels a day in July. The energy watchdog also warned prices were higher than they should be and were “causing economic damage”.

It said: “The market is tight, production and infrastructure capacity is less than desired and uncertainties continue to weigh on the market.”

Motorists and airline passengers have been among those hit by recent sky-high oil costs as producers work flat out to meet increasing demand.

Drivers were yesterday warned to expect another penny on petrol prices over the next month as fuel companies pass on the impact of the rise.

Paul Horsnell, head of energy research at Barclays Capital, said that although hurricanes were common in Florida, the prospect of tropical storm Bonnie had a larger than normal impact on prices due to the tight supplies.

He also said it was “not inconceivable” that the cost of crude could hit $50 (€40.90) if the situation in Iraq becomes much worse.

A string of rallies have pushed the cost of oil to new heights in the past 10 days.

Fears of terrorist attacks, disruptions to Iraqi crude exports, and financial troubles at Russia’s largest oil producer, Yukos, have all fuelled soaring prices.

Both British Airways and Virgin Atlantic more than doubled their long-haul fuel surcharges with effect from today as a result of the hikes.

The two carriers’ current charge of £2.50 (€3.70) rose to £6 (€9)for a single long-haul flight, with the figure for a return trip up to £12 (€18) from £5 (€7.50).