[OIL PRICES] Markets ignore Saudi oil concession

Saudi Arabia's offer of a further increase in production to halt the oil price spiral failed to have any impact yesterday on markets more preoccupied with the shutdown of a North Sea oil and gas field, the weakness of the dollar and the renewed surge in product prices.

Futures contracts in New York hit a new intra-day peak of $139.89 a barrel at one stage, before closing down 25 cents at $134.61, while North Sea Brent jumped more than $2.40 to $137.52 in London, on the back of the Statoil decision to cut output from the Oseberg field by 150,000 barrels a day follow

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Sterling jumped to its highest level for two weeks on a trade weighted basis in anticipation that the Bank of England's Monetary Policy Committee will be pressured into increasing interest rates because of inflation worries, while the dollar continued to lose ground against the euro.

Figures out today are expected to show consumer price inflation in Britain is running at an annual rate of 3.1pc, well above the 2pc target level agreed with government. Mervyn King, Governor of the Bank, will have to write what analysts feel will be first of a series of letters to the Chancellor explaining why the target has been missed.

Saudi Arabia's decision to increase production by another 500,000 barrels a day followed a meeting with Ban Ki-moon, the United Nations secretary-general, in Jeddah. The increase, the second in a month, will push Saudi output to 9.7m daily barrels and comes as Saudi prepares for a meeting of oil producers and consumer governments in Jeddah to try to put a brake on rising prices.

Malcolm Wicks, energy minister, welcomed the Saudi decision but failed to get the United Arab Emirates to follow suit.

Source: The Telegraph|By Roland Gribben

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