Opec divided as Saudis lift oil output

JEDDAH - The Jeddah energy summit, convened to address rocketing oil prices, called on Sunday for greater transparency and regulation in dealing and more investment in production.

The summit's final communique came amid accusations by oil producers that "speculators" are playing a key role in the dramatic rise in crude prices that earlier this month hit a record close to 140 dollars per barrel.

"Participants noted with concern that oil prices have risen sharply and become more hostile due to a host of factors," said the closing statement from the high-profile meeting of major oil powers and consumers in this Saudi city.

"Participants agreed that the situation requires concerted efforts from all parties - producing and consuming countries - to bring stability to the international oil market for the benefit of all," it added.

Leaders and ministers from the 36 nations agreed to recognise that "the transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market."

The statement also appealed for increased investment in crude production to ensure markets have sufficient supplies.

"The existence of spare capacity throughout the chain is important for the stability of the global oil market," it said.

"Hence, an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are well supplied in a timely and adequate manner."

Earlier, Saudi Arabia's King Abdullah launched an offensive against oil "speculators" on Sunday as he opened a summit on the soaring price of crude which exposed OPEC divisions over whether to increase production.

The king announced that Saudi production had now risen to 9.7 million barrels a day, the highest figure since 1981, in a bid to defuse market tensions that have forced the price of a barrel up to almost 140 dollars.

The king, who said his country would give 1.5 billion dollars to efforts to ease energy shortages in poorer countries, told the 36-nation summit his country was "very concerned" about consumers everywhere.

He blamed increased oil consumption and taxes on fuel but added: "Among other factors behind this unjust increase in oil prices is the abhorrent acts of speculators seeking to undermine the market."

The summit has seen an international debate over the cause of the doubling of oil prices in the past year. The United States and other western powers have blamed production shortfalls while Saudi Arabia and other Organisation of Petroleum Exporting Countries (OPEC) members said "speculators" have played a key role.

OPEC was split however in whether to follow Saudi Arabia's lead in increasing output.

Kuwait said it was ready to increase production but the OPEC President - Algeria's Oil Minister Chakib Khelil - insisted this was not necessary.

US Energy Secretary Samuel Bodman said before the summit that "there is no evidence that we can find that speculators are driving futures prices" to current record heights.

He told the meeting: "Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing and increasingly volatile prices.

Warning that prices would almost certainly rise further, Bodman said: "In the absence of any additional crude supply, for every one per cent increase in demand we would expect a 20pc increase in price in order to balance the market."

German Economy Minister Michael Glos added: "The oil markets now need a strong signal from the production side."

An increase in production would be "a strongly needed signal to the financial markets to not gamble any more on an increasing oil price," he told the summit.

India's Finance Minister P Chidambaram and Australia's Resources and Energy Minister Martin Ferguson also called for oil-producing nations to increase their output, diplomats said.

Kuwaiti Oil Minister Mohammed al-Olaim said that OPEC members "will not hesitate" to increase production if the market needs it.

But OPEC President Khelil insisted there is enough oil to supply the market.

"We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply," he told a briefing.

"Why would you have a supply problem when demand is going down?" he asked.

Khelil said the 13-nation OPEC would only consider a production increase at a regular meeting in September.

"We believe speculation, in its noble and not noble terms, has its impact," the OPEC chief said.

A Saudi source said there is scope for other countries to follow his country's production increase as there are up to three million barrels of spare capacity within OPEC nations.

British Prime Minister Gordon Brown, the senior western leader at the summit, called for a "new deal" between consumers and producers.

But like many Europeans at the meeting he said production shortages and speculation had to be studied.

Brown said that the world was going through "the biggest of all three oil shocks" in recent decades.