Oil: Price soars after Opec fails to reach agreement

9th June 2011

The hopes of motorists and western economies have been dashed after a meeting of the oil cartel Opec broke up in disarray without reaching an agreement to increase crude output.

The Guardian website reported that "political turbulence in North Africa and the Middle East undermined the usual consensus at the meeting in Vienna and led to speculation that new internal rivalries could split the group, leading to even more market chaos".

Saudi Arabia, the world's largest oil producer and influential Opec dove, was 'outmaneouvered' by Iran, Venezuela, Libya and others.

FT.com (paywall) reports that the the startling development sent Brent crude up more than $2 to a one-month high of $118.59 a barrel.

It reported: "West Texas Intermediate, the US benchmark, moved above $100 a barrel. Price of Brent crude soared a further $1.65 to $118.43 a barrel as an expected Opec agreement to raise its production quotas by about 1.5 million barrels a day failed to materialise."

The Guardian adds that petrol in Britain averages 136p a litre – 18p more than a year ago – and Edmund King, president of the AA, said the prospect of a new rise on the back of the failed Opec meeting was a "slap in the face" for the consumer.

Ali al-Naimi, oil minister for Saudi Arabia said: "We were unable to reach an agreement – this is one of the worst meetings we have ever had."

The meeting took place as huge political turmoil continues to rock the Middle East.

Qatar has been backing Libyan rebels fighting the government of Muammar Gaddafi, while Saudi Arabia has angered Shi'ite Iran by using force to help the Sunni-led Bahrain suppress a Shi'ite rebellion.

But, this time, those in Opec politically opposed to the United States – led by Iran and Venezuela – found enough support to block Saudi Arabia whose views normally hold sway.

Production quotas have now remained unchanged since 2009. The International Energy Agency, the global watchdog, expressed its "disappointment" at Opec's decision and urged producers to increase output anyway.

A World Bank report out earlier this month warned that further rises in the price of oil and food pose the biggest threats to recovery in the poorest economies.

On the Guardian website readers were quick to warn of the implications if an agreement is not reached soon.

Teaandchocolate writes: "There is less oil than they are letting on. That's why they won't increase production.

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