Page last updated at 21:59 GMT, Monday, 16 June 2008 22:59 UK

Oil at record near $140 a barrel

Worker checks over oil pumps in Iran
There have been calls for increased global oil output

The price of crude oil has hit a new high of close to $140 a barrel in New York trade, despite Saudi Arabia agreeing to increase output in July.

During Monday's session, US light crude rose to $139.89 a barrel, surpassing the previous high of $139.12 on 6 June. It later fell back from the record high, to close at $134.61.

On Sunday, Saudi Arabia said it would boost production by 200,000 barrels a day next month to meet growing worldwide demand.

That would make a total rise of 550,000 barrels a day, or over 6%, since May and would take Saudi output to its highest monthly rate since August 1981.

The news was announced after UN Secretary General Ban Ki-Moon met Saudi Oil Minister Ali al-Naimi in Jeddah for talks on the high oil price.

The market has got it in its head that we are about to run out of oil, and is looking for negative news
John Hall, oil analyst

Last month, Saudi Arabia increased its production by 300,000 barrels a day.

The country is thought to be the only oil producer with the ability to pump substantially more crude.

It argues that the current high prices are caused by speculators rather than any shortage of crude oil.

Oil prices had fallen by almost $2 on Friday after reports that Saudi Arabia might boost oil production but many believe that this pledge is too little too late to bring down oil prices.

Extremely volatile

"If they'd have said this six months ago, it might have had some effect," said oil industry expert John Hall.

Oil expert talks about the reasons behind the high price

"But the market has got it in its head that we are about to run out of oil, and is looking for negative news."

"The market is extremely volatile at the moment," he added. "Any disruption to supply is immediately jumped on."

Speculation about the future of oil prices has been rife recently, with some analysts predicting oil could jump to as much as $200 a barrel during the next 18 months.

The extra 200,000 barrels a day from Saudi Arabia are just a drop in the ocean
Oz, Seattle, USA

Israeli threats to strike Iran over its nuclear programme have also helped fan the flames.

Movements in the currency markets on Monday also triggered the latest price spike, with the dollar weakening against the euro and subsequently making oil cheaper for investors dealing in other currencies.

Meanwhile, Norwegian oil firm StatoilHydro saw oil and gas production temporarily abandoned when a fire broke out on the 90,000 barrel a day North Sea platform.

Saudi oil tracker
15 Jun 08 |  newstracker

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