Oil: Prices hold above US$51 on consumer concerns

NEW YORK - Oil held above US$51 a barrel on Friday despite fresh warnings from big consuming nations that economic growth may suffer from a renewed rise in fuel costs.

A commodity-wide influx of speculative fund money has helped pump up oil prices by US$6 over the past two weeks, driven by a weak dollar as well as a late-winter cold spell and forecasts for tightening market conditions this year.

US oil prices settled up 10 cents to US$51.49 a barrel, after climbing to US$52.05 on Thursday, the highest since November 1. Brent crude rose 17 cents to US$49.61.

Dealers shrugged off news of rising US crude stockpiles to focus on Saudi Oil Minister Ali al-Naimi's forecast that oil would stay between US$40 and US$50 for the rest of this year, a signal the OPEC cartel might be happy with such levels.

In the past, members of the Organization of the Petroleum Exporting Countries (OPEC), which controls about 40 per cent of global exports, had said they viewed US$50 as too high.

Sustained global growth has backed up the view that consuming nations can weather higher costs, but consuming nations are growing increasingly anxious as prices close in on last year's record US$55.67 peak.

US Treasury Secretary John Snow said he was not happy 'one bit' with oil prices, while the head of the International Energy Agency told Reuters high oil prices would hold back economic growth.

"The price is extremely high. It is unreasonable and we have said for some time that it will hurt the economy," said Claude Mandil, head of the IEA, which advises industrialized nations on energy policy.

"I don't think that all the noise being made on prices staying high for all this year is very helpful. I hope producers refrain from saying that prices should remain at this level."

OPEC BACKS OFF CUT

Despite fears OPEC may now harbor a higher price target, the cartel has backed away from plans to cut supply for the second quarter, when consumption traditionally eases following the northern winter.

Venezuela and Indonesia both came out in favor of leaving output limits steady when the group meets in Iran on March 16.

"I think a US$50 oil price is too high and OPEC doesn't need to cut production quotas," Iin Arifin Takhyan, director general oil and gas in Indonesia's energy ministry, told reporters.

Kuwaiti Oil Minister and OPEC President Sheikh Ahmad al-Fahd al-Sabah said this week the producers could look to cool prices.

The group is already pumping near full capacity, leaving little global cushion to meet supply problems, even with US inventories at seemingly healthy levels.

- REUTERS