Oil prices ease after Friday surge

Oil prices slipped back today after rising beyond $139 a barrel on Friday, as US unemployment rates unexpectedly jumped.

The price of crude touched $139.12 last week in New York's main future's contract, following the rise in unemployment and comments about Iran's nuclear programme from Israel's deputy prime minister Shaul Mofaz.

Today the surge sent shares in oil companies higher on the FTSE 100, while banking stocks traded down.

But the price has since fallen back slightly, to $137.61.

There have been calls for the Organization of the Petroleum Exporting Countries (Opec) to step up oil production, but the group has refused.

"I think there is enough oil in the market, I did not hear anybody calling for a meeting," Shokri Ghanem, head of Libya's National Oil Corporation, told Reuters.

Opec has refused to pump more oil, claiming the high prices are not to do with a lack of supply but political tensions and speculation.

Capital Economics analyst Julian Jessop said: "Friday's $11 jump in the price of a barrel of crude provides the clearest evidence yet that the oil market is increasingly detached from fundamentals.

"We are raising our assumptions for the future path of oil prices to reflect the higher starting point and increased uncertainty."

However, the spike is likely to be temporary, Mr Jessop added.

"Overall, we are sticking to our view that rising spare capacity and a sustained recovery in the dollar will undermine oil prices in the second half of the year," he said.

"Indeed, the extreme price volatility that we are now seeing is characteristic of bubbles that are about to burst. The next big move is therefore likely to be down."

Energy ministers from the Group of Eight (G8) said they had "serious concerns" over the level of oil prices when they met on Sunday and said there was an "urgent need for increased and timely investment in the energy sector".