Opec weighs oil options

MELBOURNE - Oil prices raced to a new all-time peak yesterday, climbing towards US$58 ($81.93) a barrel as Opec signalled it would discuss a second output rise to try to quell the market's relentless rally.

United States light crude hit a record US$57.79 a barrel, surpassing Friday's high of US$57.70, triggered by a forecast that prices could spike above $100 due to robust global demand and tight spare capacity.

US crude was up 31c at US$57.58, while London's Brent crude struck an all-time peak at US$56.80 a barrel, marking a gain of 29c.

"I would have thought prices would struggle to go much higher. The market fundamentals suggest lower prices," said Mark Pervan, an analyst with Daiwa Securities in Melbourne.

"I think they will struggle to get over US$60 in the next couple of weeks - that is a big psychological barrier."

Opec President Sheikh Ahmad al-Fahd al-Sabah said at the weekend he would likely start consulting member producers over a 500,000 barrel-per-day (bpd) increase to group supplies to cool the market.

The Organisation of the Petroleum Exporting Countries lifted output limits by 500,000 bpd to 27.5 million bpd in mid-March and left room for a second rise before a June ministerial meeting if prices failed to ease below $55.

"We had suspended [consultations] for a period of time because of the decline in prices," Ahmad said. "But now, the reality of prices requires that we once again undertake communications for the purpose of consultations with the fellow Opec oil ministers ... pertaining to the 500,000-bpd hike."

The Nigerian presidential adviser on petroleum, Edmund Daukoru, said on Sunday the increase could happen within two weeks if prices stayed above $55 for at least the next 10 to 14 days.

US oil prices have surged 33 per cent this year, with big-money speculative funds buying heavily on signs that rapid demand growth in Asia's emerging economies and the United States would strain world supply.

Prices have gained more than US$3 since Thursday, when top energy derivatives trader Goldman Sachs released a report saying oil markets might have entered a "super-spike" period which could eventually drive them towards US$105.

Concerns about US gasoline stocks ahead of the peak summer demand season were also partly behind last week's price jump after a handful of refiners had production problems. US gasoline futures struck a new all-time high last Monday at US$1.7380 a gallon.

- REUTERS