Saudi hike may not be enough to end oil bull run

NEW YORK (Reuters) - Saudi Arabia's plan to crank up oil output may not be enough to choke crude's record rally and bring relief to consumer economies battered by surging fuel costs.

OPEC's biggest exporter announced plans to hike output to 9.7 million barrels per day (bpd) -- the fastest pace in decades -- at a meeting between consumers and producers in Jeddah over the weekend.

Analysts say the hike, which added 200,000 bpd to a previous pledge to increase production 300,000 bpd, might not be enough to stem the bullish momentum that has sent prices up nearly 40 percent this year to peaks close to $140 a barrel.

"It's tough to say that the addition of 200,000 bpd and the Saudis pulling out all the stops to try to get the market down is still a bullish thing, but in this market that's how it appears," said Peter Beutel, president of Cameron Hanover. "Even their best wasn't good enough this time around."

Oil prices have surged nearly seven-fold since 2002 as rising demand from emerging economies such as China and India stretches demand growth. U.S. crude rose more than $1.50 to near $137 a barrel on Monday after the meeting, and some forecasters say $150 a barrel could now be in the cards.

Oil's swift rise this year surprised many experts, with some -- including OPEC -- blaming an influx of cash from nontraditional investors such as pension funds for pushing prices beyond the level supported by supply and demand.

Others in the sector, including U.S. Energy Secretary Sam Bodman, insist prices are being driven solely by a lack of supply. Analysts said they were disappointed that the meeting did little to advance this divide on the cause of record oil.

"I was expecting to get some dialogue or greater transparency, and all we heard the Saudis do was regurgitate that speculation was the root cause (of high oil prices) and that there are barrels available," said Stephen Schork of the Schork Report.

"If the Saudis didn't give us a reason to sell, it's a reason to buy."

Saudi Arabia has said that it has made extra oil available but has met with little interest from its customers.

Ahead of the meeting, some experts argued the Kingdom could discount its oil steeply to encourage refiners to build up inventories to help push down prices.

Such a visible move could help shake out the speculators who have rushed into oil this year to hedge against rising inflation and the falling dollar.

"If the Saudis are truly serious about bringing down prices and selling more than 9.7 million bpd, they will have to cut their price differentials," Societe Generale said in a statement.

"Given their obvious caution on Sunday, we do not believe that this will happen."

Other analysts argue that while the Saudi move might not cool off prices in the short-term, it does signal a serious commitment by the Kingdom to bring down skyrocketing fuel prices that have caused global protests -- even if other OPEC members insist there is nothing they can do.

"This was a Saudi meeting. They called it, they had something to announce, they set the stage, they invited the world, they announced their production increase," said Tim Evans, energy analyst for Citi Futures Perspective.

"We're really talking about ramping up 500,000 bpd over a two-month period. It reflects a degree of seriousness to the Saudi response to high oil prices. They mean it."

(Additional reporting by Richard Valdmanis, editing by Matthew Lewis)