Oil prices ease after record high

Oil prices eased slightly today after surging yesterday to a new record high of more than US$140 a barrel.

The cost of crude hit $140.39 in commodity trading in New York yesterday following comments from the President of production cartel Opec that prices could rise to $170 this summer.

However, oil slipped around one dollar to $139.42 in early electronic trading today.

Yesterday's five dollar spike sent stock markets diving both here and in the US as investors fretted over the implications of high oil prices for the economy.

London's FTSE 100 Index slumped nearly 3% as trading was also overshadowed by gloomy outlooks for inflation from the Bank of England, while New York's Dow Jones Industrial Average fell more than 3% to its lowest close in nearly two years.

Brokers today forecast the Footsie to fall around 20 points when it opens this morning, sending it below the 5500 barrier.

Opec president Chakib Khelil forecast that the cost of crude would rise to between $150 and $170 a barrel this summer.

The Algerian energy minister said in an interview with French television channel France 24 he hoped the oil price spike would ease back later in the year and dismissed market fears of a surge above $200 a barrel.

However, he cautioned that a major market crisis, such as production stopping in Iran, could see prices rise to $200 or more.

Opec's grim forecast for summer oil prices comes as calls mount for the group to increase oil production and help reduce soaring fuel inflation.