World oil prices tumbled from 13-year peaks at $40 today after leading world exporter Saudi Arabia said OPEC should raise supply to stop high prices hurting world economic growth.
The Saudi remarks reassured markets after a sabotage pipeline attack at the weekend struck Iraq's crude exports, reinforcing fears over Middle East supply security.
US light crude fell $1.17 a barrel to $38.76, after striking the $40 mark on Friday for the first time since October 1990 in the run-up to the first Gulf War. London's Brent crude was down $1.18 at $35.82 a barrel.
Prices slid after Saudi Arabian Oil Minister Ali al-Naimi said OPEC should raise its production target by at least 1.5 million barrels per day (bpd) from the current 23.5 million bpd ceiling it meets on June 3rd.
OPEC cut its ceiling by one million barrels daily, or 4 per cent from April 1st, to head off a fall in prices when demand ebbs after the northern winter.
The curbs - combined with concern over Middle East security, low US fuel supplies and strong Chinese demand - have fuelled oil's rally, alarming importing nations about the possible impact on economic growth.
High prices have deterred OPEC from enforcing the cutbacks in full, and the group is producing around two million barrels per day above its formal limits.
Fellow Gulf members the UAE and Iran over the weekend also said OPEC could raise official quotas to cool the price surge, which has added $7 a barrel, or 22 per cent, to the cost of crude since the turn of the year.
Oil importing nations are increasingly worried about the impact on economic growth, although analysts say that the world is far less exposed to a rise in energy costs than in the oil shocks of the seventies.
"In 1973, oil prices quadrupled in a matter of months. In 1979, they doubled in less than a year. The current price increases remain, thus far, relatively moderate," said Mr Frederic Lasserre of Societe Generale bank.
The Saudi comments outweighed the impact of a weekend assault on a southern Iraqi pipeline that sliced into exports from Iraq's main Gulf oil export terminal The extent of damage from Saturday's sabotage attack was unclear.