 Oil prices have more than doubled in the past year |
The cost of oil has eased after Friday's record-breaking surge but analysts have warned that prices are likely to remain highly volatile. US light, sweet crude slid $4.19 to $134.35 after Friday's unparalleled $11 jump to $139.12. Brent fell $3.78 to $133.91, down from a record of $137.69. Some G8 nations have called for output to increase to curb price inflation. But Nigeria's oil minister said Opec would only fuel panic by calling an emergency meeting to discuss quotas. "I am concerned, as is everyone," Odein Ajumogobia said of the current state of prices. "But such a sudden and significant upward spike is proof to me that Opec cannot affect the current and perhaps unprecedented level of volatility. "An extraordinary meeting of Opec will only further fuel speculation in my view." 'Market dysfunction' Most Opec members are reluctant to increase production, arguing that the market is already adequately supplied with oil. But critics argue that supplies are failing to keep pace with the growth in demand and that prices are set to head towards $200 a barrel in the next 18 months. "We are not going to see a substantial reduction in demand," said Victor Shum, an energy analyst with Purvin & Gertz, who described Friday's price surge as unprecedented. "Supply side concerns will continue to support pricing," he said. Stock markets across Asia fell sharply on Monday amid concerns about the impact of escalating oil prices on the region's economic prospects. Japan's benchmark Nikkei index fell 2% while in India, where the government is under pressure over fuel subsides, the main Sensex index at one point fell more than 4%. "It is anybody's guess where the oil prices will go," said Gul Tekchandani, an investment adviser in Mumbai. Speaking at an industry conference in Malaysia, BP chief executive Tony Hayward said it was clear the oil market was not "functioning" as it should. "Where prices are high, they show that supply is not responding adequately to rising demand," he said. Tax claims High levels of government taxation were reducing the amount firms could invest in new sources of oil he said, adding that BP would invest $22bn on new production in 2008. "The taxes governments take from the oil and gas industry have continued to increase across the world. I believe this is unsustainable and counter-productive." Friday's 8%, or $11, rise in prices - the largest daily increase in history - was triggered by weak US employment figures and comments that a military strike on Iran's nuclear facilities was "inevitable" in the future. It also followed hints by European Central Bank President Jean-Claude Trichet on Thursday that the central bank may soon raise rates in the eurozone to try and contain inflationary pressures. The US, UK, China, Japan, India and South Korea have all called on oil producers to increase output to try to control the soaring prices. But Opec has said no new decision will be made until its meeting in Vienna on 9 September.
| 
One-Minute World News 
E-mail this to a friend 
Printable version 
It is anybody's guess where the oil prices will go
BBC News
Bookmark with:
What are these?