Oil surges to record high near $140

Oil surged to a new record high on Monday of nearly $140 a barrel, propelled by weakness in the U.S. dollar which offset the bearish impact of plans by Saudi Arabia to boost output.U.S. light, sweet crude for July delivery was up $3.74 at $138.60 a barrel by 2:17 p.m., after falling as much as $1.40 a barrel, or about 1 percent, earlier in the session.U.S. crude set a record high of $139.89 a barrel.London Brent crude was up $3.05 at $138.16.Prices leapt as the dollar fell after publication of data from the New York Federal Reserve that showed manufacturing in the state of New York contracted in June for the fourth time in five months.

“Prices rose sharply in three minutes. U.S. manufacturing data was weak, so it is pressuring the dollar down,” said Mike Wittner, energy analyst at Societe General.

Earlier in the session prices had dropped back after United Nations chief Ban Ki-moon said over the weekend that Saudi Arabia, the world’s biggest oil exporter, was set to increase output to 9.7 million barrels per day in July, its second supply boost in as many months.

That would be a rise of 550,000 bpd or over 6 percent since May and would take Saudi output to its highest monthly rate since August 1981, according to U.S. government data.

Saudi plans emerged ahead of a meeting of oil producers and consumers on June 22 to find a solution to record oil prices that have caused consumer protests in Asia and Europe.

Some analysts view Saudi output increase as a signal that other members of the Organization of the Petroleum Exporting Countries might follow.

“I think OPEC will add more barrels next week and it will have to be significant enough for the world to stand up and take notice,” said Rob Laughlin, analyst at futures broker MF Global.

CONSUMER PROTESTS

Saudi Arabia’s invitation to producers and consumers to meet in Jeddah this weekend is in response to the growing protests from consumers over record oil prices that could threaten the health of the global economy.

Oil has doubled in the last year and risen 40 percent since the start of this year, boosted by expectations that supply will struggle to meet demand from newly industrialising countries such as China and India.

The weak U.S. dollar and investment inflows have contributed to oil’s advance to a record of nearly $140 a barrel this month.

The rapid price increase has spurred demands from politicians to introduce curbs on so-called speculators in the oil futures markets.

The world’s richest nations, which met in Japan at the weekend, warned that soaring commodity prices could cut economic growth, but stopped short of offering any plan to calm markets.

Some analysts questioned whether Saudi Arabia’s plan to pump more oil would temper prices.

“If they want to put pressure on prices they need substantial price discounts that would encourage greater stock building,” said David Kirsch of Washington-based PFC Energy.

Saudi Arabia had pledged a month ago to increase supply by 300,000 bpd this month versus May to meet demand from buyers, primarily in the United States.

Saudi Arabia is the only member of OPEC with the spare capacity to boost supplies quickly and significantly. It could pump around 2 million bpd more than it does.