The oil price yesterday hit its highest level since the immediate aftermath of the 11 September terrorist attacks as Opec dashed hopes it will open the taps next month to ease a growing shortage of stocks.
Crude oil for delivery in September briefly rose 22 cents to hit $29.55 a barrel on the New York Mercantile Exchange, the highest price since 14 September – the first trading day after the World Trade Centre attacks.
Yesterday's leap was triggered by a warning from Kuwait that Opec, the cartel of 11 oil states, would not sanction a rise in output unless the price rose further.
"My feeling is that with the current prices we will keep the same strategy and there will be no quota changes in September," Sheikh Ahmad al-Fahd al-Sabah, the acting oil minister, said.
He said Opec would not act unless the oil price broke through $28 on an index used by the cartel, that is currently at $26.58 a barrel. It meets on 19 September.
Yesterday's price hike follows a jump of $2 a barrel during last week on mounting speculation the US was poised to launch an imminent attack on Iraq.
Economists said rising oil prices would be ringing alarm bells at the White House and the Federal Reserve.
Michael Derks, chief global strategist at Commonwealth Bank of Australia, said the Fed might have to cut rates if the oil price stayed above $30.
"It would represent another blow to the consumer at a time when they are already dealing with the negative wealth effect of the plunge in equity prices and a jobs market which remains weak," he said.
There have been growing signs of a consensus of opinion within the Bush administration of the need to take firm action against Saddam Hussein.
"People are waking up the extra risk that is being attached to that whole regions," Mr Derks said.
The price has also been supported by evidence that oil inventories are dwindling. The most recent crude inventory levels showed stocks at 17-month lows.
But the Centre for Global Energy Studies, a think-tank founded by the former Saudi oil minister Sheikh Zaki Yamani, said Opec had little room to raise output.
The consulting group expects global oil demand to rise by 1.4 million barrels a day in the fourth quarter from the previous three months, less than the 1.9 million forecast by the International Energy Agency.
"Unless oil demand growth is much stronger than expected for the fourth quarter, Opec will have no room to boost output if it wishes to keep prices around $25 a barrel," CGES said. ©