JEDDAH: The crude market will likely shrug off Saudi Arabia’s output hike in the aftermath of the Jeddah oil crisis summit and fresh unrest in crude producer Nigeria, analysts say.

Major oil powers and consumers gathered in the Red Sea city on Sunday to hammer out a global long-term strategy to defuse the current energy crisis which saw oil prices strike a record peak of almost $140 last week.

Saudi Arabia, the biggest global oil producer, drew traders’ attention by ramping up daily production to 9.7 million barrels the highest level for more than two and a half decades in a bid to dampen the red-hot market.

“The price will probably go back up to $140 per barrel this week because there is nothing to hold it back,” said John Hall, who runs energy consultancy John Hall Associates.

Analysts contend that the latest Saudi hike was already priced into the volatile oil market after recent heavy hints about a looming output increase.

“Saudi Arabia announced that oil output would increase by 200,000 barrels per day to 9.7 million bpd, and if the delegates had expected something significant to suppress the oil this was not it,” said Hall.

“With further threat of attack on Iran from Israel and further supply disruptions in Nigeria, the oil price is now destined to rise further.

“Had Saudi Arabia wanted to make an impact then it should have offered to increase its output by at least 500,000 bpd or even one million bpd.” However, Capital Economics analyst Hugh Navarro argued that the output rise would provide some crumbs of comfort for traders.

“I think it’s some comfort. Prices might come down a bit,” said Navarro, who added that they were unlikely to breach $140 this week barring any further shock to the market.

“I do not see investors bringing prices back down to $120 a barrel.” But Navarro agreed that recent events in Nigeria would dictate price movements in the coming days.

Violence in the Niger Delta has reduced its oil production by a quarter in the past two years, contributing to surging world oil prices.

“Unrest in Nigeria will trump events elsewhere ... because Nigerian oil is a light high quality crude which refiners prefer,” Navarro said.

In contrast, the Saudi oil is heavy, sulphurous oil which it not as easy for refiners to convert to gasoline or petrol.

Aside from the output hike, oil consumers and producers also agreed that they needed to invest more in downstream and upstream oil output.

Raad al-Kadiri, oil analyst at PFC Energy, said the Jeddah summit had attempted to coordinate a global strategy to combat high prices.

“There was a lot of determination towards international cooperation ... but there were no real concrete solutions” beyond the Saudi output increase, Kadiri said.

“Despite all of the discussions and all of the statements about the need for cooperation, there is still quite a gap between producers and consumers in terms of what they see as the primary factors driving this market and also what they see as the main priorities and measures to be taken to reduce prices.” Saudi Arabia announced on Sunday it has raised its production to the highest level since its peak production in 1981 and reiterated it would raise its production capacity to 12.5 million bpd by the end of next year.

The kingdom also unveiled plans to raise its output capacity by a further 2.5 million bpd through massive investments in five oilfields, but gave no timeline for completion of the projects.

That would take the kingdom’s total capacity to a potential 15 million bpd.—AFP