LONDON - World oil prices soared Wednesday to a new record high above 56 dollars in New York after falls to US crude stockpiles, and despite a move by OPEC to hike its output quota with immediate effect, dealers said.
The surge came as US President George W Bush expressed concern about high oil price levels.
New York`s main contract, light sweet crude for delivery in April, surged 1.30 dollars to reach as high as 56.35 dollars a barrel in early deals.
That beat the previous record of 55.67 dollars reached last October 25, before moving back to 56.05 dollars.
In London, the price of Brent North Sea crude oil for delivery in April jumped 1.10 dollars to reach also a new record of 54.95 dollars a barrel.
The Brent price beat the previous record of 54.30 dollars reached March 9.
"Unbelievable," said Phil Flynn at Alaron Trading about the new record highs.
"We had a combination of things: the big drop in gasoline inventories caught the market by surprise, plus the fact that China talked yesterday about building some strategic petroleum reserves using their forex reserves."
This development was "very bullish" for oil prices, he said.
The US Department of Energy (DoE) said gasoline supplies dropped by 2.9 million barrels and distillate stocks fell by 1.9 million barrels in the week ended March 11.
The falls sparked worries that supplies would struggle to keep up with robust global demand for energy.
The DoE meanwhile said that US crude inventories rose by 2.6 million barrels.
The surge in prices came despite a move by OPEC to hike its output quota with immediate effect on Wednesday and a warning by Bush over soaring prices.
"I am concerned about the price of energy," the president said at a White House press briefing.
"I`m concerned about what it means to the average American family, when they see the price of gasoline going up. I`m concerned what it means to small businesses."
The Organisation of Petroleum Exporting Countries, meeting in Iran, agreed to raise its crude oil production ceiling from 27 to 27.5 million barrels per day, and said in a statement it would consider raising quotas by a further 500,000 bpd if oil prices remain high.
"This decision is a reaffirmation of OPEC`s commitment to ensuring adequate supplies consistent with robust economic growth, in particular in the economies of the developing world," it said.
"The conference decided to increase the production ceiling to 27.5 million barrels per day effective immediately.
"The conference further authorised the (OPEC) president, after consultations with fellow heads of delegations, to allow an additionnal 500,000 barrel per day increase in the ceiling by its next meeting (June 7) should prices remain at current levels or continue to further rise," it added.
The market had turned around after a dip in early trading, with tensions easing after OPEC ministers decided to raise their production ceiling.
Uncertainty was set to continue in the oil market, despite the OPEC output hike, analysts said.
"We are going to go from record to record for some time," said Societe Generale analyst Frederic Lasserre.
"OPEC tried in vain to reassure the market" but it had little effect on prices, he said, adding that "the US stocks caused an immediate surge".
World oil prices have now more than doubled since early 2002.
Adjusted for inflation, however, they remain far below levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today`s money.
03/16/2005 17:54 GMT