Oil rises ahead of Opec meeting

Rapid economic growth in Asia is driving oil demand

Oil prices reached near record levels on Tuesday amid concerns a Saudi call to increase production would not have an immediate impact on the market.

Algeria and Libya have also come out against the proposal to up oil supplies by 1.9% to 27.5 million barrels a day.

The opposition came before Wednesday's meeting of the Organisation of Petroleum Exporting Countries (Opec).

In New York, US light crude rose 10 cents to $55.05 a barrel - its highest settlement price since last October.

In London Brent crude moved up 19 cents to $53.85 a barrel.

"The question as to the ability of the Saudis to jack up production to larger levels is being questioned and is adding to the bullish fervor," Jim Ritterbusch, analyst with Ritterbusch and Associates said in a note.

Production hike

On Monday Saudi Arabia called for an immediate increase in oil supplies to cope with rising demand in 2005.

If Opec members agree to a rise, it could start as early as May 1, an analyst said.

Saudi Arabia wants Opec nations to produce an extra 500,000 barrels of oil a day, taking the total to 27.5 million barrels a day.

Opec's key advisory committee has said it would recommend the Saudi plan and leave its members to decide on timing.

The advisory body supporting its plan is Opec's Ministerial Monitoring Subcommittee, which includes representatives from Nigeria, Iran and Kuwait.

Its recommendations are often adopted by Opec members.

Alternative energy

Opec is to meet on Wednesday in the Iranian city of Isfahan, with the Saudi proposal on the agenda.

Our objective is to prevent the market from unnecessarily overheating Ali Al-Naimi, Saudi oil minister

But Algerian oil minister Chakib Khelil said the move would be nothing more than a "goodwill gesture".

"It doesn't mean anything in terms of reducing the price," he told Reuters in Isfahan.

"We can add barrels, but that won't stabilise prices. Economic growth has to slow down."

Libya's Opec representative, Fathi Shatwan, said an increase in production could make it difficult for Opec to meet demand later in the year.

Kuwait is in favour of a rise, but not immediately. Iran is against, but said it would support the consensus.

The Opec nations, who between them pump a third of the world's oil, are finding it difficult to meet demand and keep the oil price under control, following increasing demand from places like India and China.

But rising oil prices are encouraging oil consumers to invest more in alternative forms of energy, leading some Opec nations to seek to curb the price surge. On Tuesday, Saudi Arabia hinted that it might be ready to raise production even if other Opec members blocked its proposal.