Oil price eases back

Oil prices have dropped back slightly from a 10-year high after Saudi Arabia told President Clinton it was expecting production to be raised by about 700,000 barrels a day.

The world's biggest oil producer said it was likely an Organisation of Petroleum Exporting Countries (Opec) meeting on Sunday would ratify the increase.

The price of benchmark Brent crude fell back to $33.65 a barrel, almost a dollar lower than its high point earlier in the day.

In after-hours trading in New York on Wednesday, crude oil futures had hit a post-Gulf War peak of $35.19.

Analysts said traders had been panicking ahead of Opec's meeting, and that speculators had also affected the market.

Fuel protests

The rise in the price of oil has resulted in sharp increases in petrol and diesel costs.

This has prompted industrial action in France which has paralysed parts of the country.

Hauliers have been blocking access to oil depots and refineries, causing acute fuel shortages, and farmers have joined the dispute, causing chaos in their attempts to block the Channel Tunnel.

In the UK, motoring organisations and drivers have reacted with dismay to forecasts that, within weeks, a litre of unleaded petrol will rise to, on average, 87 pence.

That is roughly equivalent to £4 a gallon.

Opec decision

At the Opec meeting on Sunday in Vienna, production levels are due to be discussed.

The oil price had hit its latest peak on the strength of pessimism that any agreement on raising output would be reached.

Some Opec members are deeply concerned that a production increase could propel the oil price back below the cartel's target of about $25 a barrel.

The Iranian Opec representative, Hossein Kazempour Ardebili, said the markets did not justify an increase in output of more than 500,000 barrels per day.

Informal agreement

There is already an informal agreement to raise output by this amount if prices were to stay above $28 a barrel for 20 consecutive working days.

But traders have said raising production by this amount would be insufficient to calm the market.

The EU also entered the fray on Wednesday, calling for Opec to push through a "substantial increase" in output and help drive down to prices to about $20 a barrel.

The EU's energy commissioner Loyola de Palacio said she was worried by the "explosion" in oil prices which had caused inflation in the EU to rise by 1% and threatened worldwide economic growth.