Oil prices ease after reported Saudi pledge

New York's main oil futures contract, light sweet crude for July delivery, was 86 cents lower at $134 a barrel. The contract closed at $134.86 after shedding $1.88 on the New York Mercantile Exchange on Friday.      Â

Brent North Sea crude for August delivery was 61 cents lower at $134.50. Â

Prices have soared since breaking through the 100-dollar level at the start of the year. They hit all-time highs of $139.12 in New York and $138.12 in London on June 6.

Global finance officials fear high oil prices pose a threat to world economic growth, while truckers and other users across Europe and Asia have held protests over the rising cost of fuel.

U.N. Secretary General Ban Ki-moon, after a weekend visit to Saudi Arabia, said Saudi Oil Minister Ali al-Nuaimi told him Riyadh would raise production by 200,000 barrels a day in July on top of a hike of 300,000 barrels made in June. "They (the Saudis) will respond positively whenever there is a request from their customers, so there is no shortage," Ban said. "They don't want to be blamed."

Ban quoted al-Nuaimi as saying that he felt oil-consuming countries should also play their part to stabilize prices by bringing down national taxes and combating speculators.

Ban said this was why the Saudis, the largest producer in the Organization of the Petroleum Exporting Countries (OPEC) cartel, were hosting a high-level meeting of oil producers and consumers in Jeddah next Sunday.

"The Saudis look ready to increase production," said Victor Shum of Purvin and Gertz international energy consultancy in Singapore. "That's rumored to be announced at this meeting in Jeddah."

Saudi Arabia pumps 8.48 million barrels per day, according to the International Energy Agency, a policy adviser to major industrialized countries.

OPEC WAS RULING OUT
As recently as last Thursday Chakib Khelil, OPEC's acting president, ruled out an increase in output, saying supply was greater than demand and that over-production was estimated at 500,000 barrels per day.

"I think the expected increase in Saudi oil output will temper the market sentiment some," Shum said. But he said any increase in output will come from the already-limited spare production capacity of OPEC.

That limited capacity, available in case of a real emergency, has been a key factor in driving the price rally, meaning the longer-term impact of the cartel's expected production increase could be minimal, Shum said.

G8 WARNED
World finance chiefs who met in Japan over the weekend warned runaway oil prices could imperil global economic growth. They urged oil producing countries to hike output and to invest money to ensure they can pump out enough supply in the future.

Analysts said the Group of Eight (G8) -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- also sent a warning signal to oil speculators by highlighting the inflation threat to the global economy.

Some analysts have cited the role of speculators or short-term traders, who have moved their money into commodities, in recent price volatility.

The International Monetary Fund said it would investigate the surge in crude oil costs but Shum said he did not expect the G8 ministers' comments to have much impact on prices.

"It's a case of officials, politicians, looking for a scapegoat," he said.