LONDON (AP) — Crude oil topped the psychological milestone
of $50 per barrel yesterday for the first time, and a Saudi Arabian
oil official said the world’s largest petroleum exporter
would raise its production capacity by nearly 5 percent in a bid to
calm prices.

Analysts said instability in the Middle East, political unrest
in Nigeria, Africa’s top oil exporter, and damage to U.S.
production from the Caribbean’s hurricanes were keeping
traders on edge about world supplies. Some said the price may not
be sustainable and may soon fall.

Saudi Arabia announced it will raise its oil production capacity
by a half-million barrels, to 11 million barrels in order to
“stabilize” prices.

By increasing capacity, Saudi Arabia will be able to raise
production when it wants. A Saudi oil ministry official, speaking
on condition of anonymity, said that the kingdom would increase
production “depending on demand.”

The capacity increase by the world’s largest oil exporter
will go into effect within weeks, using new fields where production
has just begun, Oil Minister Ali Naimi said.

“The fields of Abu Safa and al-Qatif, which have just
started production, will be used to increase the kingdom’s
production capacity in the coming few weeks to 11 million barrels
per day,” the minister said in a statement.

“In light of the recent developments in the oil market and
the increase in prices that exceeded $50 … Saudi Arabia is
closely monitoring the various developments in the international
oil market and is working on stabilizing that,” he said.

Naimi added that the increase was meant to control “prices
so that they will not harm international economic
growth.”

Earlier yesterday, Purnomo Yusgiantoro of the Organization of
Petroleum Exporting Countries said producers are trying to bring
prices down, but the group thinks supply is not the problem because
it has at least 1.5 million barrels a day of spare capacity.

By midafternoon in Asia, light sweet crude oil for delivery in
November traded at $50.47 per barrel, up 83 cents from the close of
Monday’s regular session in New York.

On the Mercantile Exchange in New York yesterday, light crude
for November delivery traded up 42 cents per barrel at $50.06. In
electronic pre-session trading it reached $50.47 per barrel.

On London’s International Petroleum Exchange, November
Brent crude futures traded at $46.55 per barrel, up 62 cents per
barrel from Monday’s settlement and off an earlier high of
$46.72.

Oil prices rose despite assurances from OPEC’s president
that producing nations were seeking ways to calm markets after an
announcement that the cartel would boost production by 1 million
barrels a day failed to move the price lower.

“The latest spark was the reported increase in fighting in
Nigeria,” said ANZ Bank energy analyst Daniel Hynes from
Melbourne, Australia. But the damage from Hurricane Ivan
“certainly paved the way for the latest surge.”

Rebels in Nigeria continue to battle for control of the vast
southern oil fields in the world’s seventh-largest
exporter.

The Niger Delta People’s Volunteer Force rebel group said
yesterday the insurgents will begin a full-scale armed struggle to
gain control of the regions oil riches from Nigeria’s
government beginning Oct. 1.

That rattled markets, even though Nigeria’s military
dismissed the threat and the country’s senior oil adviser,
Edmund Dakoru, told Dow Jones Newswires he is confident that
foreign oil companies won’t succumb to threats by militia
that they must halt their oil production in the country.

“We have had these kind of threats before and nothing has
happened,” Dakoru said. “And I am not concerned that
Nigeria’s oil industry will suffer as a result of these
threats.”

The United States has lost more than 11 million barrels of oil
production in the past two weeks, according to U.S. government
data, with Gulf of Mexico output still down nearly 500,000 barrels
a day following the devastation brought by Ivan.

The price of oil is up roughly 75 percent from a year ago and
some analysts predict the latest surge could lead to a global
recession

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