Saudis rule out oil boost

Oil refineries are working at capacity

The world's biggest oil exporter has made it clear it will not increase production further, despite American pressure.

Saudi Arabia, which sits on oil reserves of 260 billion barrels, one quarter of the world's total, is the key producer in the Organisation of Petroleum Exporting Countries.

In March, Opec agreed to boost production to ease pressure on oil prices, which were then touching $30 a barrel.

But now the Saudis are resisting pressure for further production increases.

The price of gasoline in the US has shot up

"We currently see no justification to think of increasing oil production at the Opec meeting in June," said Saudi Arabian Oil Minister Ali al-Nuaimi.

"Oil prices currently fall in the band drawn at the last Opec meeting, he added.

After Opec's action, crude oil prices fell back to around $25 a barrel.

But they are now rising again, pushed up by high demand in the booming US economy.

US political pressure

Oil threatens to become a political issue in the US presidential election, with prices at the pump threatening to reach $2 a gallon this summer - low by European standards, but unprecedented in America, where gasoline is far less heavily taxed.

US Energy Secretary Bill Richardson met Venezuelan President Ali Rodriguez at the weekend to try to persuade him to boost output further.

The demand for gasoline is being spurred by the booming US economy, which has led to an increase in travel and car sales.

"High prices pull down demand, but income pulls it up, and right now income is winning over price," said Larry Goldstein of the US Petroleum Industry Research Foundation.

Regulations

Other factors are also boosting US gasoline prices, including a shortage of refinery capacity and new regulations requiring cleaner-burning fuel, which come into effect on 1 June.

But the pressure on prices is leading some politicians to call for tougher action against Opec, including applying US anti-trust laws to the international cartel.

The high prices are a boost for all oil producers, including countries such as Russia, which are not members of Opec.

The best hope for price cuts may be that the high prices could encourage cheating by Opec members, who may be tempted to produce more than their quota.