Oil summit fails to halt soaring prices

Yesterday's crunch meeting of oil producers and consumers has failed to take the heat out of the oil price, which climbed again today amid mounting tensions between Israel and Iran.

The gathering in Jeddah, attended by prime minister Gordon Brown, did not produce a breakthrough on how to lower oil prices from its near-record levels. Instead it saw a clash between Brown and the head of Opec, and has also led to a war of words in Australia.

A barrel of US light crude for August delivery jumped to a high of $137.50 earlier this morning and was trading at $136.69 by 11.30am, while London Brent crude climbed $1.18 to $136.02 after hitting an earlier high of $137.24.

This came after Iran’s defence minister threatened a “devastating” response to any attack on the country in the ongoing war of words over Tehran’s nuclear programme. Pentagon officials have described a large-scale Israeli military exercise in the eastern Mediterranean earlier this month as a possible test run for a strike on Iran.

There is also concern that oil output from Nigeria will be disrupted for several weeks, following last week’s attacks on oil fields operated by Royal Dutch Shell and Chevron in the Niger delta. Experts believe the drop in Nigerian oil production after two emergency platform evacuations last week could wipe out the impact of the recent increases promised by Saudi Arabia.

Yesterday Gordon Brown clashed with the president of Opec, Chakib KHELIL , over the need to pump more oil at the emergency summit convened by Saudi Arabia in Jeddah. Khelil reiterated his view that speculation, not demand is at the heart of the oil price hike, saying “the price is disconnected from fundamentals” of supply and demand. Brown does have some support from Saudi Arabia, the world’s largest oil producer, which has announced two big increases in oil production in the past two months to 9.7m barrels a day, the highest in more than 30 years, and signalled it could do more.

High oil and petrol prices have prompted protests from truck drivers and motorists across the world. They also undermined business confidence in Germany, a key index compiled by the Munich research institute Ifo showed today. The business climate index dropped to 101.3 this month from 103.5 in May.

Politicians warned after the summit that oil, which nearly broke through $140 a barrel this month, is likely to go higher. Michael Glos, Germany’s economy minister, said: “There is the danger that the markets will be disappointed and the price will increase again.”

Canada, the top energy supplier to the United States, supports the call from G8 finance ministers for investigations into the role of speculation in the surge of oil prices, Canada’s natural resources minister Gary Lunn said yesterday.