Brent crude oil for July delivery opened 43 cents lower at $38.56 a barrel in London, partly reversing strong gains on Tuesday.
Oil prices, already historically high, have soared in the wake of a weekend terror attack on Saudi oil facilities.
The Saudi output pledge came ahead of a meeting of oil producers’ cartel Opec today.
Saudi oil minister Ali al-Naimi said his country had spare capacity of two million barrels and was “fully ready” to boost output, although he did not specify by how much.
He added that Opec was working to stabilise oil prices within its official target range of $22 - $28 a barrel.
“Today’s prices have nothing to do with the fundamentals of the oil market,” he said.
“Increasing production will not necessarily solve the problem, but we need to reverse the perception (of shortages), and this is what we will work for.”
Earlier yesterday, the United Arab Emirates (UAE) said it would raise output by 400,000 barrels a day in June.
Separately, Algerian energy minister Chakib Khelil said he was in favour of temporarily suspending Opec production quotas altogether.
The Saudi and UAE production pledges have gone some way towards soothing fears of a sustained surge in oil prices, which could severely dent growth in the industrialised world just as the global economy is emerging convincingly from a downturn.
On Tuesday, the benchmark US oil price rose to a record high of $42.45 a barrel as traders digested news of Saturday’s Saudi terror attack, blamed on Islamic militants.
The price fell back to $41.84 in early trade in New York yesterday, 49 cents down on Tuesday’s closing price.
The attack, the second in as many months, raised concerns over deteriorating security in the desert kingdom, which holds the world’s biggest proven oil reserves.
Oil importing nations continue to hope that Opec will sanction a substantial increase in its production threshold when it meets in Beirut.
Opec is thought to be already producing about 2 million barrels a day more than its official daily output ceiling of 23.5 million barrels.
But three of the organisation’s members - Saudi Arabia, Kuwait and the United Arab Emirates - could between them add an extra three million barrels a day, an Opec spokesman said on Monday.
The latest jump in oil prices has taken its toll on financial markets around the world.
In Tokyo, the benchmark Nikkei share index closed 0.5% lower yesterday, weighed down by a dip in oil-sensitive stocks.
Asian currencies were also mostly lower against the dollar amid fears that the region’s economies would be hit by higher oil prices.
Europe’s main stock markets were all higher yesterday morning, partly recouping sharp losses on Tuesday.
But analysts said that while a supply increase from Opec would help rein in prices, worries over key producer Saudi Arabia’s vulnerability to terrorist attacks would linger.
“The problem is Saudi Arabia is the kingpin,” Tom James at Tokyo-Mitsubishi International told the BBC.
Even before the latest Saudi terror attack, world oil prices had risen by about 25% since the end of last year because of soaring demand in the US and China, supply bottlenecks at US refineries, and fears that the Iraqi conflict could disrupt supplies.
However, economists point out that even at its current price, oil remains cheaper than it was in the late 1970s once the effects of inflation are stripped out. (BBC)
