Oil prices continue to rise despite Saudi call for higher output

Oil prices rose to 55.10 US dollars per barrel in London in early trading Tuesday despite calls from Saudi Arabia for an immediate increase in oil supplies to cope with rising demand in 2005.

On Monday, Saudi Arabian Oil Minister Ali al-Naimi called on the Organization of Petroleum Exporting Countries (OPEC) to hike production by 500,000 barrels, or 1.9 percent, to 27.5 million barrels per day (bpd).

He also warned that more supplies would be needed to meet a substantial increase in demand later this year.

"When you look at projected demand especially in the fourth quarter ... we see a substantial rise between the third and fourth quarter to the tune of two plus million bpd ... therefore we believe additional crude is needed," the minister said.

Naimi's comments followed last week's International Energy Agency forecast of a 290,000 bpd increase in oil demand growth to a total growth of 1.81 million bpd during 2005.

Two other OPEC members, Algeria and Libya, have come out against Saudi Arabia's proposal to increase oil supplies.

"We can add barrels, but that won't stabilize prices," Algerian oil minister Chakib Khelil said ahead of the next meeting of OPEC nations to be held in Iran on Wednesday.

Libya's OPEC representative Fathi Shatwan said an increase in production could make it difficult for OPEC to meet demand later in the year.

Analysts said the market's muted reaction to Naimi's proposal to raise OPEC's output also reflects concerns that global demand is continuing to race ahead at a time the cartel has only limited spare capacity.

They said several factors including speculative investors, cold weather in the northern hemisphere which pushed up demand for heating fuel as well as fast economic growth in some countries are all behind the oil price hike.

Source: Xinhua