Oil prices soar despite Opec pledge to increase output

Opec pledged to increase oil output by two million barrels a day yesterday but that was not enough to calm world markets unnerved by terrorism.

Many traders remained convinced that not enough oil was being pumped to meet demand at a time of extreme instability in the Middle East region.

Members of Opec, the oil producers cartel, met yesterday and agreed to raise output immediately by 2 million barrels a day, or 8 per cent, to 26 million barrels, with an additional 500,000 barrels from next month. Despite being the biggest increase in more than six years to the quota set by Opec members, the news failed to cool the high price of oil.

United States crude oil, traded in New York, was up 14 cents at $40.10 (£21.80), staying near the 21-year highs seen earlier this week.

In the United Kingdom, the continuing strength of global oil prices meant that the outlook for petrol prices at garages was for further rises, with a litre of fuel climbing towards 90p.

The news from Opec had been the minimum that world markets had been expecting and fell short of more optimistic scenarios.

Nauman Barakat, of the brokers Refco in New York, said: "The perception in the market is that we've been short-changed. This could wave a red rag to the bulls."

Opec's oil ministers will meet again on 21 July to review the new policy.

Kevin Norrish, an oil market analyst at Barclays Capital in London, said that Opec members were producing more oil than the previous quota allowed, making it unclear whether the new ceiling would bring any extra oil onto the world's markets.

"More oil is certainly needed," said Mr Norrish. "Given the demand-supply situation at the moment, $40 is a reasonable price for oil right now."

He said the high price of oil was driven by very strong demand in the United States and China as well as a lack of refining capacity in America. That meant that stocks of oil were not just being built up ahead of winter when demand is traditionally most acute.

Seth Kleinman, of PFC Energy, a United States consultancy, said that a number of Opec member countries who wanted to keep the price of oil high had deliberately suggested before yesterday's meeting that the organisation would go further than the 2 to 2.5 million barrels that had been officially advocated by Saudi Arabia, the leading member of the organisation.

Some Opec sources had indicated in recent days that all quotas may be lifted. That meant yesterday's two million barrel rise came as a disappointment and kept the oil price high.

Mr Kleinman said that the increased production among Opec member countries made Saudi Arabia, which would not be pumping at full capacity, of even more importance to the price of oil.

"Basically, all of the world's spare capacity is going to be in Saudi Arabia and that is where terrorists have shown that they will target oil infrastructure. It is that risk which puts a premium on the price of oil," Mr Kleinman said.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn