Oil price spikes as OPEC production talks break down

Oil prices spiked higher after reports that Opec producers decided to keep production unchanged as talks broke down.

Telegraph [UK]
08 Jun 2011

Brent crude prices jumped $1.42 to $118 a barrel as Saudi Arabia, the cartel’s biggest producer, failed to convince others to raise output to ease fuel inflation in struggling Western economies.

Ali al-Naimi, the Saudi Arabian Oil Minister, said: “We were unable to reach an agreement – this is one of the worst meetings we have ever had.”

He said that Saudi Arabia was committed to supply the oil market with whatever oil it needed.

Four Gulf Arab countries – Saudi, the UAE, Kuwait and Qatar – had proposed an increment of 1.5m bpd over Opec’s 28.8m bpd current production including Iraq, for overall output of 30.3m bpd. They are worried about the impact of a high oil price on economic growth.

Libya, Algeria, Angola, Ecuador, Venezuela, Iraq and Iran wanted to keep production unchanged.

Oliver Jakob, at Petromatrix in Zug, Switzerland, said: “I think it’s surprising as Saudi Arabia was pushing to increase production. So this is a surprise”.

He said it would made hard to know what will happen to Opec production.

Julan Jessop, International Economist at Capital Economics, said: “It’s disappointing, to be honest that was my view last week that there wouldn’t raise quotas, but the hints from delegates from the last days was that they would so. Clearly there will be some disappointment, and there should be a short-term spike in oil prices.”

Earlier oil prices had dipped on hopes that Opec would increase output for the first time in four years to help a fragile global recovery.

Crude prices rose above $100 in morning trading in the United States.

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