Oil rises above $108 a barrel
Energy producers and consumers meeting in Riyadh found common cause in their concern about unrest sweeping the Middle East, but not all agreed pouring more oil on to the markets would have a calming effect.
A wave of revolution that has toppled two presidents and left Libyan leader Muammar Gaddafi clinging to power has driven oil to a 2.5 year high above $108 a barrel.
Representing consumer nations, Nobuo Tanaka, executive director of the International Energy Agency, warned that if prices were sustained at current levels, they could tip the world back into the deep financial crisis of 2008.
"If $100 continues through 2011, we call it the oil burden, this will create the same level of crisis as in 2008," said Mr Tanaka.
But he also urged the market not to panic and said Saudi oil minister Ali al-Naimi had assured him the kingdom would take action in the event of supply disruption.
Mr al- Naimi, who kicked off a day of talks, bringing together more than 80 nations from both sides of the producer-consumer divide, has yet to answer reporters' questions and has so far confined his public comments to a welcoming address.
His deputy yesterday said the market had plenty of oil, while a Gulf delegate today said Opec's policy was clear.
"If there is a shortage in the market, it will be filled by Opec. Right now, there is no shortage," the delegate said.
Others warned a new-jerk supply boost could be counter-productive.
"I don't think Opec will take any action to raise production now because a rise in output would put the market in panic and prices would rise further," one delegate said.
Oil markets rose by 6 per cent or around $6 to a peak of $108.70 yesterday after the kind of popular revolt that ousted leaders in Tunisia and Egypt erupted in OPEC member Libya. The market was still above $107 today.
The scale of unrest in Libya has provided the biggest jolt yet to oil markets in the two months of turmoil.
Until it spread to the capital Tripoli this week, many in the oil world has assumed the country's oil wealth would be enough to contain unrest.
The Libyan upheaval is also particularly significant to oil markets because it has disrupted supply and, although the amount affected so far can be replaced, concern has grown about how far the contagion could spread.
Libya's most senior oil official was among those who stayed away from today's talks.
The almost unthinkable scenario would be supply disruptions from Saudi Arabia, which provides around 10 per cent of the world's oil and also holds most of the world's spare capacity.
It is the only producer able to respond quickly with large volumes of oil to compensate for a serious supply outage.
Oil prices are still well below the all-time high of more than $147 a barrel touched in July 2008.
The pace of that rally prompted Saudi Arabia to call emergency talks in its Red Sea port of Jeddah and pledge to supply more oil if the market needed it.
In the immediate aftermath, the market rallied further before world financial crisis sent it crashing down to little more than $30.
Opec in response agreed its biggest ever output cut in December 2008 and has not formally changed policy since, although it has progressively increased production above agreed targets.
The group is not scheduled to meet formally to reassess output policy until June.
The market is much better supplied and has higher levels of inventory than it was in 2008 when emerging China, the world's second largest oil consumer after the United States, led a surge in demand.