Oil prices have surged to new 13-year highs above $40 a barrel on concern that OPEC may not pump enough oil to meet rapidly accelerating world oil demand.
US light crude climbed to a peak at $40.38 a barrel today, less than $1 off the 41.15, all-time high for New York crude futures, reached in October 1990 after Iraq invaded Kuwait. London Brent crude was up 14 cents at $37.50 a barrel.
Importing nations are increasingly worried about the economic fallout of higher energy costs. The price spike 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 again.
OPEC President Purnomo Yusgiantoro of Indonesia 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.
The statement will underline concerns in the market about how much actual extra oil OPEC will release should it decide to lift production quotas when ministers meet on June 3rd in Beirut.
Ministers are considering raising official production limits from 23.5 million bpd after Saudi Arabia proposed lifting quotas by at least 1.5 million bpd.
Prices have rocketed nearly $8, or 24 per cent, since the start of the year as stronger-than-expected energy consumption among industrialised nations bolsters explosive demand growth in China.
The International Energy Agency, adviser on energy to 26 industrialised nations, said its world growth forecast represents the largest absolute increase in global oil demand since 1988.
The IEA also said non-OPEC supply is failing to meet growth expectations, despite rising volumes from Russia, raising the requirement on OPEC for extra crude.
"The welcome resurgence in economic activity brings to the fore the issue of securing the necessary supplies to sustain the recovery," the report said.
Concern that US refiners will not be able to make enough of new gasoline grades for peak summer holiday driving demand has underpinned the price surge.
The US government is due to release its weekly inventory report later
today. Ten analysts surveyed by Reuters forecast that US gasoline stocks would show a rise of 1.6 million barrels in the week to May 7th.
Supply security worries from the Middle East have also fired up prices. Iraqi oil exports from the Basra Oil Terminal are still reduced to 1.1 million bpd after pipeline sabotage at the weekend.
A return to normal flows of 1.6 million has been delayed until tomorrow. The weekend attack came just two weeks after suicide bombers attacked tankers at the terminals.