Oil hits new 13-year high, OPEC supply major worry

US oil prices struck new 13-year highs above $40 a barrel on Wednesday as the market remained concerned over tight supplies, despite a call by the world’s biggest exporter for OPEC to raise output next month US light crude climbed to a peak at $40.38 a barrel, less than $1 off the all-time high for New York crude futures at $41.15, reached in October 1990 after Iraq invaded Kuwait. At 0632 GMT, US crude was up 20 cents at $40.26 a barrel. Oil has ridden a roller coaster this week, dropping $1 on Monday when Saudi Arabia proposed that the OPEC producers’ cartel raise output limits by 1.5 million barrels a day (bpd) to cool down red-hot prices, which have surged 20 pc this year.

The kingdom proposed the increase be adopted at the scheduled June 3 OPEC ministers’ meeting in Beirut. But the market bounced back to highs not seen since just before the first Gulf War on doubts that the OPEC increase would tip the supply-demand balance in an already constricted market. OPEC has been pumping 1.5 million to 2.0 million bpd above its official production ceiling of 23.5 million bpd since it agreed to cut supply by one million bpd from April 1.