International oil markets yesterday poured scorn on Saudi Arabia's pledge to pump more crude, forcing prices close to their recent 21-year high.
Mr Ali Naimi, Saudi Arabia's oil minister, said at the weekend that the kingdom would unilaterally raise output by 10 per cent to 9.1 million barrels per day and it could raise production to more than 10 million barrels a day if needed.
His comments came as the Organisation of Petroleum Exporting Countries (OPEC)failed to reach consensus on increasing output, delaying a decision until its meeting in Beirut next week.
Crude prices dipped briefly at the prospect of increased supply from Saudi Arabia. But traders shrugged off the news and analysts said it was not clear if the kingdom could produce enough.
The July futures price in New York was up $1.77 (€1.47) a barrel to $41.70 yesterday, 15 cents short of its record. Brent crude climbed more than 4 per cent to $38.06.
The reaction further undermined Saudi Arabia's role as the world's "central bank" of oil, able to guarantee supplies even in tight markets. To pump more than 10 million barrels a day would require Saudi to produce at levels it has only briefly sustained in the past 20 years.
Mr Goran Trapp, a managing director of commodities at Morgan Stanley, said: "The market has turned full circle. Now the market is concerned that the Saudis are unable to supply sufficient volumes of oil and the type of oil... the market requires."
The higher price also reflected the confusion caused by Saudi Arabia's move, which has upset fellow OPEC members.
Finance ministers from the Group of Eight industrialised nations at the weekend urged all producers "to provide adequate supplies to ensure that world oil prices return to levels consistent with lasting global economic prosperity and stability".
