US oil rose to within a few cents of a new 21-year record today as traders and analysts doubted whether Saudi Arabia's weekend pledge to raise output unilaterally was enough to bring supply up enough to meet demand.
US light crude futures rose nearly $2.00 a barrel to trade as high as $41.80, just five cents short of its 21-year record reached last Monday. London Brent crude was up $1.60 higher at $38.11 a barrel.
"There is scepticism as to if what the Saudis can do will be enough in the context of inventory demand," said Jan Stuart, Fimat USA analyst.
Saudi Arabia's Oil Minister Ali al-Naimi confirmed over the weekend that Riyadh was boosting output to 9.1 million barrels per day (bpd) to meet demand next month. That would lift Saudi production by 10 per cent from an estimated 8.3 million bpd in April.
US Energy Secretary Spencer Abraham said Mr Naimi had told him Saudi Arabia would meet demand to a total of 9.1 million bpd in June and that it would meet requests up to their capacity of 10.5 million bpd going forward.
But traders said even the extra Saudi crude would not necessarily be enough to meet global demand, explaining why prices have again shot higher after news of its output hike.
"Saudis in last two weeks offered one proposal after another for increased quotas for OPEC and yet prices haven't fallen significantly and are up again this morning," said Mr Nauman Barakat, senior vice president at Refco.
The Organisation of the Petroleum Exporting Countries (OPEC) held informal talks in Amsterdam on Saturday before a forum with consumer nations, including the United States.
The Saudi proposal has caused dissent among OPEC members, with some apparently angered by the unilateral move to raise production.
Cartel ministers made no recommendation on the proposal to raise group output limits. A decision is due at full OPEC talks on June 3rd in Beirut.