NEW YORK (Reuters) - Oil prices eased on Monday as top world producer Saudi Arabia appeared poised to boost production to the highest level in decades to ease a record rally that has threatened global economic growth.
The dip into negative territory came after a brief surge earlier in the session to a record high near $140 a barrel, triggered by weakness in the U.S. dollar and an emergency shutdown of a North Sea oil platform.
“After today’s rally to near $140, people are reassessing the situation, noting that we may be getting more barrels from OPEC and mindful that the Saudis are hosting a summit of producers and consumers this weekend,” said Andy Lebow, oil analyst at MF Global in New York.
U.S. light, sweet crude for July delivery settled down 25 cents at $134.61 a barrel, off a record high of $139.89 set earlier in the session. London Brent crude fell 40 cents to $134.71.
Oil prices have surged about 40 percent in wildly volatile trade since the start of the year and are up nearly seven-fold since 2002, propelled by rising demand in China and other developing nations.
United Nations chief Ban Ki-moon said over the weekend that Saudi Arabia, under pressure from consumer nations calling for more supplies, was set to increase its oil output to 9.7 million barrels per day in July.
That would be a rise of 550,000 bpd, or over 6 percent, since May, and would take Saudi output to its highest monthly rate since August 1981, according to U.S. government data.
U.S. Energy Secretary Sam Bodman said Monday the United States, the world’s largest energy consumer already hard-hit by soaring gasoline prices and a slumping housing market, would welcome the move.
Saudi Arabia’s plans emerged ahead of a meeting of oil producers and consumers on June 22 to find a solution to record oil prices that have caused widespread consumer protests.
Some analysts said, however, the move may not be enough to stem oil’s rally.
“The (Saudi) move does not seem to be enough to reverse the recent strength in prices, as it does little to repeal the longer-term expectations for tight demand-supply balances on the back of robust non-OECD demand and faltering non-OPEC supply,” Barclays Capital said in a research note.
U.S. oil refiners said on Monday that they would not be interested in buying any additional Saudi oil unless the price was steeply discounted.
The rapid price increase has also spurred demands from politicians to introduce curbs on so-called speculators in the oil futures markets. Investors have rushed into commodities this year as a hedge against the weak dollar and inflation.
Prices had leapt earlier in the day as the dollar fell versus the euro amid expectations the European Central Bank will hike interest rates to fight inflation.
Dealers added that the shutdown of Norwegian oil producer StatoilHydro’s Osenberg A oil platform in the North Sea due to a fire had also encouraged some buying.
Additional reporting by Jane Merriman and Ikuko Kao in London and Jonathan Leff in Singapore; editing by Jim Marshall