Oil Prices Jump $2 as Supply Hike Talks Unravel

Reuters

Oil prices jumped by $2 on Wednesday after OPEC failed to reach a deal to increase output, raising fears of supply shortages later this year and a price rally that could damage global economic recovery.

OPEC talks broke down without an agreement to raise output after Saudi Arabia failed to convince other members to lift production.

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"We were unable to reach an agreement -- this is one of the worst meetings we have ever had," Saudi oil minister Ali al-Naimi said.

By 1355 GMT U.S. light crude was up $1.40 dollars at $100.50 while Brent added $1.08 at $117.86.

"It came as a surprise. It is bullish for prices. If you look at demand it will be very robust in the next months and there is a big need for extra OPEC oil," said Amrita Sen from Barclays Capital. OPEC's Secretary General Abdullah El-Badri said the effective decision was no change in policy and that OPEC hoped to meet again in three months' time.

The U.S. Energy Information Administration will issue its weekly inventory data later on Wednesday.