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Oil surges ahead of Jeddah meeting

Oil surges ahead of Jeddah meeting
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First Published: Sat, Jun 21 2008. 03 20 PM IST
Updated: Sat, Jun 21 2008. 03 20 PM IST
New York: Oil stormed higher Friday ahead of a weekend meeting of the major players in the market in Saudi Arabia aimed at discussing skyrocketing prices.
New York’s main oil futures contract, light sweet crude for July delivery, leapt $2.69 to close at $134.62 a barrel. The contract, which expired Friday, ended the week nearly flat in volatile trade after hitting a record high of $139.89 Monday.
In London, Brent North Sea crude for August rose $2.86 to settle at $134.86 a barrel. It had struck a record peak of $139.32 Monday.
On Sunday, Opec kingpin Saudi Arabia is hosting major oil consumers, producers and oil companies at a meeting in Jeddah to examine why crude oil has more than doubled in price in the past year.
“No one expects any breakthrough from Sunday’s meeting in Jeddah,” said Mike Fitzpatrick at MF Global.
Analysts at Barclays Capital stressed the extraordinary nature of the meeting amid heightened market strains.
“Set against the backdrop of mounting recent international tensions about oil prices and a drift towards internal regulatory intervention in several countries, the Jeddah meeting has perhaps become symbolic of a collection of potential policy watersheds,” they said in a client note.
Saudi Arabia, the world’s biggest oil exporter, is widely expected to formally announce an output increase in Jeddah.
Ahead of the conference, a statement posted Thursday on the website of the Saudi embassy in London said the kingdom has decided to boost its daily oil output by 200,000 barrels to help cool record-high crude futures. The statement was later withdrawn without comment or elaboration.
Other leading members of the Organization of the Petroleum Exporting Countries, the cartel which produces 40% of world oil, claim supplies are adequate to meet demand.
Opec president Chakib Khelil said on Friday it was illogical and irrational to ask the oil cartel to increase output so as to take the pressure off soaring prices, the Algerie Presse Service (APS) news agency reported.
Meanwhile Iran said Friday that increased output would not affect soaring prices.
But geopolitical tensions did after The New York Times, citing US officials, reported a major military exercise carried out by Israel earlier this month seemed to be a practice for any potential strike against Iran’s nuclear facilities.
“Buyers clearly are worried then that a resultant conflagration could engulf the entire region and threaten the world’s oil supply, particularly the Strait of Hormuz,” Fitzpatrick said.
Supply concerns grew after Anglo-Dutch oil giant Shell declared Friday force majeure on 225,000 barrels per day for June and July deliveries from its offshore Bonga oilfield in Nigeria, following an attack by militants.
Force majeure is a legal clause allowing producers to miss contracted deliveries because of circumstances beyond their control.
Consumers such as the US claim that major oil producers are not producing enough to help cool mounting prices. Saudi Arabia is believed to be the only OPEC member with significant spare output capacity.
Analysts meanwhile argue that further production increases would still be unable to keep up with demand, notably in energy-hungry nations such as China and India.
Major oil producers in turn blame the soaring cost of fuel on speculative trade, political unrest and a weak US currency, which makes dollar-priced goods such as oil an attractive haven from inflation.
Venezuela, one of two Latin American members of Opec and a producer that firmly opposes greater output as it seeks to maximize earnings, said overnight that it had decided against sending a delegation to Jeddah.
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First Published: Sat, Jun 21 2008. 03 20 PM IST
More Topics: Oil | Light sweet crude | Brent | Opec | Saudi Arabia |