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Oil Prices Rise Ahead of Key Meeting in Saudi Arabia

Oil prices have risen ahead of a key meeting between oil producers and oil consumers to be held in Saudi Arabia.

Crude oil for July delivery rose more than two percent, $2.84, at the close of trading in New York Friday, at times spiking by more than four dollars a barrel.

Oil prices began rising after a media report that U.S. military officials said a large scale Israeli military exercise was practice for a potential attack on Iran.

Oil prices also rose after Royal Dutch Shell said it would not make good on any scheduled oil deliveries from its Bonga offshore oil field in Nigeria. The company suspended production at the facility after militants attacked it on Thursday.

Also Friday, the head of the Organization of Petroleum Exporting Countries said increasing oil production is "illogical."

OPEC President Chakib Khelil told the Algerie Presse Service oil prices have been driven up by speculation and geopolitical tension.

Khelil said he will argue against any increase in production when oil producers and consumers meet Sunday in Jeddah.

Saudi Arabia had announced plans to increase oil production by 200,000 barrels a day on Thursday.

Iranian officials, reacting to Saudi Arabia's statement, said Friday increasing oil production would not help to bring prices down.

Iran is OPEC's second-largest oil producer after Saudi Arabia.

The officials said the world should instead focus on developing oil resources and ensuring peace and stability in oil-producing regions.

Oil prices dropped almost five dollars a barrel Thursday on word China was cutting fuel subsidies, after setting a record high of close to $140 a barrel earlier in the week.

The European Union announced Friday it was looking for ways to ease the pain of rising gas prices.

EU leaders asked the European Commission to study short-term solutions and report back by October.

Europeans pay some of the highest prices for gasoline in the world.

Some information for this report was provided by AFP, Bloomberg and Reuters.