Oil ministers say global markets well supplied as Libya triggers fear of much wider disruption
Top exporter Saudi Arabia on Tuesday stopped short of pouring more oil on to markets that have vaulted above $100 as unrest swept the Middle East, telling visiting consumer nations prices were driven by fear.
A wave of revolution that has toppled two presidents and left Libyan leader Muammar Gaddafi clinging to power propelled oil to a 2-1/2 year high this week above $108 a barrel.
The scale of unrest in OPEC member Libya has provided the biggest jolt yet to oil markets in two months of Middle Eastern and North African turmoil and it dominated a day of producer-consumer talks hosted by Saudi Arabia in Riyadh.
Saudi Arabian Oil Minister Ali al Naimi said the Organization of the Petroleum Exporting Countries led by Saudi Arabia was always ready to pump more oil - but only when needed.
"What I would like you to convey to the market: right now there is absolutely no shortage of supply," Naimi told a news conference.
"I think this is a situation of fear, concern which will be very short term and will have no long range effect."
Naimi drew a contrast with 2008 when oil prices raced to their all-time high of more than $147 a barrel.
"This is not 2008. It's extremely different. Today supply and demand are equal," he said.
The pace of the 2008 rally prompted Saudi Arabia to call emergency talks in its Red Sea port of Jeddah and pledge to supply more oil if the market needed it.
In the immediate aftermath, the market rallied further before world financial crisis sent it crashing down to little more than $30.
Representing consumer nations, Nobuo Tanaka, executive director of the International Energy Agency, agreed the market had more supply and OPEC had more spare capacity than in 2008.
He warned, however, that if prices were sustained at current levels, they could tip the world back into the deep financial crisis of 2008.
"If $100 continues through 2011, we call it the oil burden, this will create the same level of crisis as in 2008," Tanaka said.
Oil markets on Monday rose by 6 percent or around $6 to a peak of $108.70 after the kind of popular revolt that ousted leaders in Tunisia and Egypt erupted in OPEC member Libya. The market was still above $106 on Tuesday.
Until protests spread to the Libyan capital Tripoli this week, many in the oil world had assumed the country's oil wealth would be enough to contain unrest.
Libya's most senior oil official was among those who stayed away from Tuesday's talks.
OPEC Secretary General Abdullah al Badri, who is Libyan, attended the Riyadh talks, but did not speak publicly.
Iran's oil minister, current holder of the rotating OPEC presidency, was also absent from Riyadh, although the country's OPEC governor Mohammad Ali Khatibi was there.
He told Reuters there was too much turmoil for any early OPEC decision.
"We need a stable situation to see the impact of these developments on the market," he said. "OPEC cannot decide every day."
The Libyan upheaval is particularly significant to oil markets because in contrast to the Tunisian and Egyptian uprisings, it has disrupted supply.
Although the amount affected so far can be replaced, concern has grown about how widely the contagion could spread.
The almost unthinkable scenario would be supply disruptions from Saudi Arabia, which provides around 10 percent of the world's oil and also holds most of the world's spare capacity.
It is the only producer able to respond quickly with large volumes of oil to compensate for a serious supply outage.
Already Saudi Arabia, together with other OPEC members, has unofficially increased production above output targets that have officially been in place since December 2008.
The group is not scheduled to meet formally to reassess output policy until June.