Oil prices scaled fresh highs yesterday, forcing Opec to consider a second output increase just a day after its deal to raise supplies failed to halt crude's record-breaking advance.
US light crude set a record of $57.60 a barrel, surpassing most forecasts made at the start of the year, before easing to close at $56.30, down 16 cents on the day.
London Brent crude, benchmark for European imports, hit an all-time high of $56.15 a barrel before closing at $55.06, an 18-cent gain.
One delegate to the Organisation of the Petroleum Exporting Countries (Opec) meeting in Iran this week expressed concern about the mood in the cartel. "Normally we meet this time of year to look at the second quarter, but now we are already talking about the fourth quarter," the delegate said. "It is a very strange time. I have not seen it like this before."
Opec agreed on Wednesday to raise output immediately by 500,000 barrels per day (bpd) to a record 127.5 million bpd. The agreement allows the addition of a further 500,000 bpd if prices do not fall.
Opec had wanted to calm prices, but its move was seen by traders as a sign of the cartel's concern about meeting demand next winter.
"If prices continue as they are now during the coming seven-10 days, we will begin our contacts with our colleagues so we can consult on the additional 500,000," said Opec president Sheikh Ahmad al-Sabah, Kuwait's oil minister.
Iran, however, was reluctant to consider another immediate quota rise. "We have to wait until at least mid-May, before we know what the demand is going to be like going into the summer," said Hossein Kazempour, Iran's representative to Opec.
Opec did little to calm fears about the second half of the year when it warned yesterday that it expected global demand to reach almost 86 million bpd in the fourth quarter - a figure that is about 3.5 million bpd above its estimate for the second quarter.
With output already near a 25-year high, Opec is stretched to meet rising demand, encouraging the investment community to bet that oil's bull run can go further.
Investors are diversifying into energy and commodities, driving US crude on average to $49.16 so far this year, up $7.70 from 2004's average and $18 higher than the 2003 mean.
Rodrigo Rato, the head of the International Monetary Fund, said yesterday that oil prices posed a risk, but that world economic growth still was expected to beat 4 per cent in 2005.
Unrelenting demand growth from China is fuelling strength in other emerging Asian economies, while the United States so far is absorbing higher fuel costs.
Oil's charge to new highs came after US government data on Wednesday showed gasoline stocks off 2.9 million barrels, more than three times market expectations. - (Financial Times Service/Reuters)
