Oil prices struck a new high yesterday on simmering concern that rapid growth in fuel demand will outpace global supplies at a time when traders fear a sabotage attack on the Middle East oil infrastructure.
US light crude reached $41.85 a barrel, the highest price since the New York Mercantile Exchange launched the crude contract in 1983.
By the close of European business, it had eased to $41.10 but ended US trade at $41.55, up 17 US cents on the day. London's Brent crude rose five cents to $37.91 a barrel.
"The short term is dominated by low gasoline stocks in the United States and Europe and deterioration of the Middle East situation. Neither is likely to change much in the months to come," said Société Générale economist Mr Frederic Lasserre.
Low US petrol inventories ahead of peak demand in the summer months, a surge in global consumption driven by healthy economic growth and worries that instability in the Middle East may disrupt supplies have attracted investment hedge funds to oil in droves.
Crude prices are up $9 a barrel, or 28 per cent, since the end of last year.
The United States has led consumer countries' calls on the OPEC producer cartel to release more supply as fears gather of inflation and a slowdown in economic growth.
OPEC, which controls half of world crude exports, will convene informally later this week on the sidelines of an Amsterdam conference and again in Beirut on June 3rd for a full ministerial meeting.
Ministers will discuss a proposal from Saudi Arabia to raise the group's official production limits by at least 1.5 million barrels per day to cool prices.
OPEC president Mr Purnomo Yusgiantoro said yesterday the cartel was unhappy with such high oil prices.
"High oil prices can cause recession. We are not happy with high oil prices," said Mr Purnomo, who is also Indonesia's oil minister.
Even so, oil dealers are sceptical that OPEC has enough spare production capacity to bring prices down as most OPEC countries, except top exporter Saudi Arabia, are producing flat out.
The group is currently pumping more than two million barrels per day (bpd) above its official production ceiling of 23.5 million bpd to feed demand, which has been especially strong in China and the United States.
Iran, OPEC's second-biggest producer, has given guarded support to the Saudi proposal, cautioning that oversupply could deflate oil prices towards autumn.
"A possible increase of OPEC production by 1.5 million barrels per day would display the organisation's co-operation and understanding with consumers even though OPEC is not responsible for the situation," Iran's OPEC governor Mr Hossein Kazempour Ardebili said.
"We are still concerned about the trend of crude oil stockpiling by the consumer countries ... that may push prices down in the future as we enter into autumn," he said.
Venezuelan President Mr Hugo Chavez said it was not necessary for OPEC to increase production, while Algeria and Qatar have expressed doubt that extra OPEC supply will bring down prices.
Saudi Arabia has already allocated higher June supply for US and European customers, and state tanker firm Vela booked extra supertankers to the United States for June loading.
"The Saudis are not going to let prices run up to levels that could damage the global economy in the long run and thereby result in demand destruction for crude," said Washington DC-based analysts PFC Energy in a report.
