Oil prices climb again as Opec shelves plans to raise output

Oil prices surged last night after the Organisation of Petroleum Exporting Countries shelved plans by the oil producers' cartel to increase production at the end of the month.

Oil prices surged last night after the Organisation of Petroleum Exporting Countries shelved plans by the oil producers' cartel to increase production at the end of the month.

September Brent crude, the London benchmark, gained 76 cents to close at $29.72 a barrel as oil prices leapt back towards the post-Gulf War highs recorded in March. In New York, light crude oil gained $1.11 to close at $31.94 a barrel.

Prices made rapid gains after Ali Rodriguez, who is the Venezuelan oil minister as well as Opec's president, said there would be no oil production rise at the end of July because prices had fallen below the upper limit of Opec's price target band. In the wake of his comments, the US administration yesterday repeated that it wanted Opec to pump more crude oil. "We've asked the Opec nations to keep an open mind about increased oil production, and we continue to believe an increase is good for both producing and consuming nations," a White House spokesman said. Although petrol prices in the US have fallen back from the record highs reached earlier this summer, the administration is still worried that high oil prices could slow the US and world economy.

The price of Opec's basket of benchmark crude prices fell to $27.46 a barrel on Monday, below the $28 a barrel ceiling required to trigger an automatic 500,000 barrels per day increase in supply. Under an informal Opec agreement adopted in June, the basket price has to stay above $28 for 20 consecutive days for more oil to be released.

Mr Rodriguez, who only on Monday notified member states to prepare to raise supply, said the 20-day clock would start ticking again when prices go above $28.

His comments flew in the face of a plan announced by Saudi Arabia earlier in the month to increase output by 500,000 barrels daily, in a move to ease prices to about $25 a barrel. Traders were divided last night over whether Saudi would press ahead unilaterally with the increase. Saudi Arabia has remained silent in recent days.

The Iranian oil minister Bijan Zanganeh yesterday said his country would insist on sticking to the rules for the cartel to implement the incremental production.

Opec may have the chance to sort out the confusion prevalent in the markets after the arrival in Venezuela of the group's secretary-general Rilwanu Lukman. Mr Rodriguez is scheduled to meet Mr Lukman today to discuss a September cartel heads-of-state summit.