SAUDI ARABIA. Leaders of global oil powers and consumer nations gathered in Jeddah on Sunday seeking ways to control spiralling oil prices seen as a mounting threat to the world economy.

Oil prices have rocketed on the back of a falling dollar, global political tensions, limited spare capacity and what many say is pure speculative trading.

OPEC has argued that speculation and the weak dollar are behind the record prices.

OPEC president Chakib Khelil opposed increased production to counter record oil costs saying "the price is disconnected from fundamentals" of supply and demand.

"We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply," Khelil, the Algerian oil minister, told a briefing as the summit started.

Western consumer nations at the Jeddah summit want increased production to ease supply concerns which they say have forced prices up to almost US$140 a barrel. OPEC countries say market "speculators" have played a key role in pushing up global prices.

Kuwaiti Oil Minister Mohammed al-Olaim said Sunday that OPEC members "will not hesitate" to increase production if the market requires it.

"OPEC will not hesitate to make any increase in production if the market required that ... for Kuwait, we will not hesitate to increase production if the market required," Olaim told reporters ahead of the Jeddah oil meeting.

"What is bringing us together is a sincere wish to be responsible," Saudi Arabia's Deputy Petroleum Minister Prince Abdulaziz bin Salman told a press conference late Saturday.

Saudi Arabia has already announced it will increase output by 200,000 barrels a day to 9.65 million a day.

"We will meet demand," the prince vowed. "If demand requires more crude, we shall sell it."

But Saudi Arabia is one of the nations that wants action against "speculators" and its gesture in increasing production has not been matched by most other members of OPEC which accounts for about 40% of world output.

A Saudi source said there is scope for other countries to follow however.

"Some people believe there is one million barrels of spare capacity within OPEC outside Saudi Arabia," the source told reporters.

"Saudi Arabia has two million so all together that is three million." World production is currently just over 80 million barrels a day.

State-owned Saudi Aramco said last week that it would start pumping oil from its 500,000 barrel-a-day Khursaniyah field within a month. Aramco also said it was ready to use its spare capacity, which included 1 million barrels of Arab Light crude, to meet market demand.

King Abdullah will open the international energy conference in Jeddah on Sunday. As many as 38 countries, four international organisations and 30 oil companies are expected to attend the conference.

British Prime Minister Gordon Brown, the senior western leader at the summit, has called for a "new deal" between consumers and producers.

He wants producer nations to "invest in countries like ours, and oil consumers like us with good companies, with good technology and skills can invest in the oil-producing countries."

Brown said in an interview with The Guardian newspaper that the world was going through "the biggest of all three oil shocks" and called it "the downside of globalisation."

He predicted that "the world is going to have to build 1,000 nuclear power stations."

US Energy Secretary Samuel Bodman insisted meanwhile that there is nothing to back accusations that "speculators" had pushed oil prices to their record levels.

"There is no evidence that we can find that speculators are driving futures prices," Bodman told a press briefing in Jeddah.

"It is clear that financial markets have seen unprecedented movement of capital into commodities in recent years. Our view is that this capital is following the market upward, it is not leading that movement."

Bodman said: "Fundamentally tight market conditions in our view are the major driver of the dramatic price increases that we have seen over the last five years, and particularly in recent months."

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