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NEW YORK - OIL prices surged nearly 4 per cent to a record over US$140 (S$191) a barrel on Thursday after Libya said it was studying possible options to cut output in response to potential United States actions against producer countries.
US crude settled up US$5.09 at US$139.64 a barrel, after hitting an all-time high of US$140.39 earlier, eclipsing the previous record of US$139.89 a barrel hit on June 16. London Brent crude settled up US$5.50 at US$139.83 a barrel.
'The crude oil market spiked sharply higher in early trading after Libyan National Oil Company chief Shokri Ghanem said that Libya was considering a production cut,' said Mr Tim Evans of Citi Futures Perspective.
Mr Ghanem, Libya's most senior oil official, said he was studying the possibility of reducing production in response to a bill before the US Congress that would empower the Justice Department to sue members of the Organisation of Petroleum Exporting Countries for limiting oil supplies.
'We are studying all the options,' Mr Ghanem said. 'There are threats from the Congress and they are taking Opec to court, extending the jurisdiction of the US outside the US.'
Libya pumped about 1.71 million barrels per day (bpd) of oil in May, according to a Reuters survey, out of total Opec output of 32.12 million bpd.
US President George W. Bush has said he would veto the legislation if it were passed by Congress.
The House of Representatives passed the bill in May, but the Senate has yet to schedule a vote on the measure.
Oil prices have rallied over the past six years, supported by surging demand from emerging economies like China.
Rising flows of cash into commodities from investors seeking to hedge against inflation and the weak dollar have added to gains this year.
The dollar fell broadly on Thursday after the Federal Reserve held interest rates steady on Wednesday and dashed expectations of an imminent rate hike.
Economic stress
Oil's gains helped push down US stocks on Thursday, with the Dow falling to its lowest level since September 2006 on recession worries.
Rising fuel costs have strained economies and spurred protests around the globe, prompting Opec kingpin Saudi Arabia to pledge to hike output during a meeting between producer and consumer nations over the weekend.
Opec President Chakib Khelil said in an interview on Thursday that prices could reach US$170 a barrel in the coming months, and he reiterated the cartel's position that speculation - not a supply problem - was driving oil to new highs.
'I forecast prices probably between US$150 and US$170 during this summer. That will perhaps ease towards the end of the year,' Mr Khelil told France 24 television, according to a text of the interview released by the station.
Oil prices fell on Wednesday after US government data showed a surprise build in the crude inventories of the world's top consumer as demand continued to drop.
Nigerian oil workers met with Chevron management and the Opec country's oil minister on Thursday in an effort to avert an all-out strike that could cut output. -- REUTERS
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