‘Speculators’ blamed for oil rise

Abdullah also said that Saudi Arabia would give $1bn to an Opec (Organisation of the Petroleum Exporting Countries) fund for developing countries and $500 million in “soft” loans for poor countries to finance energy and  development projects.

Delegates from 36 countries and 22 oil companies attended the meeting, called to discuss the global oil price crisis which has led to protests around the world.

The price of crude has more than doubled in a year to almost $140 a barrel, triggering demonstrations from Brussels to Bangkok over rising fuel costs.

Western pressure

The US and other Western countries have put increasing pressure on Saudi Arabia to increase production, saying insufficient oil production has not kept pace with growing demand.

Samuel Bodman, the US energy secretary, insisted before the summit that “there is no evidence that we can find that speculators are driving futures prices” to current record heights.

He said that “market fundamentals show that production has not kept pace with growing demand for oil, resulting in increasing … and increasingly volatile prices.

“Even despite higher global production for oil so far this year,  inventories have been drawn down and current world production capacity is below historic levels – at fewer than two million barrels per day.”

Cautioning that prices would almost certainly rise further, Bodman  said: “In the absence of any additional crude supply, for every one per cent increase in demand we would expect a 20 per cent increase in price in order to balance the market.”

Mohammed al-Olaim, the Kuwaiti oil minister, said that Opec members “will not hesitate” to increase production if the market needs it.

‘Enough supply’

Chakib Khelil, the Opec president, said there was enough oil to supply the market.

“We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply,” he said.

“Why would you have a supply problem when demand is going down?”

Khelil said that Opec had decided no special meeting on production was needed  now and that a decision would be made at a regular Opec meeting in September.

“We believe speculation, in its noble and not noble terms, has its impact,” he said.  

Khelil said much of the rising costs can be explained by currency-market turbulence.

“A lot of people are talking about the uncertainties about the reserves. But what about the uncertainties on the dollar?” he said.