World oil prices have surged to record highs, even as the Organization of Petroleum Exporting Countries announced a boost in production.
For the first time, oil prices rose above $56 a barrel in New York for light sweet crude, while Brent North Sea crude hit a new record of $54 and 85 cents a barrel in London.
The spike in prices came on a day when OPEC decided to raise its collective crude-oil production by 500,000 barrels a day, from 27 to 27.5 million barrels. At a meeting in Iran, the 11-member cartel pledged to consider raising the quotas even further if oil prices remain high.
The OPEC move did not appear to impress the market or many analysts.
"It will have some effect on prices, but it is largely symbolic," said Herman Franssen, who heads the Washington-area consulting firm, International Energy Associates. "There is very little spare capacity in the system, which makes people nervous about future supply. Outside of Saudi Arabia, the [United Arab] Emirates and Kuwait, everybody produces at maximum level. Those three countries determine in the market place how much additional oil will be added, because everybody else is at capacity."
Mr. Franssen, who previously served as an advisor on petroleum matters to Oman, says OPEC has established production ceilings, but has yet to set a new ceiling for target oil prices since a previous ceiling, in the mid-$20 per barrel range, was obliterated in 2003.
Speaking at the OPEC gathering, Kuwait's energy minister, Sheikh Ahmad Fahad Al-Ahmad Al-Sabah said surging oil prices are of great concern. He said current price levels are not sustainable, and that volatility benefits neither producers nor consumers.
The minister blamed seasonal factors such as winter weather in the Northern Hemisphere and supply disruptions in Iraq for high oil prices, but added that global oil supply remains adequate to meet expected demand.