Saudi oil output boost fails to dampen market

19 May 2008

A decision by Saudi Arabia to boost oil production has failed to cause oil price falls around the world.

The price of US light, sweet crude soared to a record $127.98 (£65.41) a barrel last week as concerns grew that China would be forced to import more supplies to support reconstruction efforts following the recent devastating earthquake.

Saudi Arabian oil minister, Ali al-Nuaimi, announced last Friday that the kingdom has raised oil production by 300,000 barrels per day as of May 10th, increasing total output to 9.45 million barrels per day for June.

Demand for oil remains high, while a weak US dollar and concerns about supplies in Iraq and Nigeria continue to push up prices.

Oil prices nudged closer to the $127 a barrel mark in early Monday trading, rising above Friday's closing price in spite of the Saudi announcement.

Iran has defied calls to raise output and stated that oil markets remain oversupplied, with increased production unlikely to affect prices at present.

Home heating oil customers will be closely watching movements in oil markets over the coming months, as analysts predict further increases over the coming year.