Opec pushed its oil production to the highest level in its 48-year history last month, even as demand was slipping in the US and Eur-ope, the International Energy Agency (IEA) said yesterday. The combination of surplus supply and weaker demand has pushed oil prices to $113.50 a barrel, down 24 per cent in the last month and the lowest level since late April. The effort was led by Saudi Arabia, which had come under increasing pressure for doing too little to compensate for lower supplies from countries outside Opec, where growth has been lacklustre as fields have aged in countries such as the UK and Mexico. In mid-June, as oil inventories were running low, King Abdullah called a high-level international meeting in Jeddah and pledged to help reduce record prices by increasing Saudi production from 9.4m barrels a day to 9.7m b/d, the highest level in 30 years. The market brushed aside the pledge, sceptical of whether the kingdom would make good on its promise and instead worried about supply outages in Nigeria. The oil price steadily climbed from just below $140 a barrel on the day of the meeting to $147.27 in July. Yesterday preliminary data of Saudi shipments proved sceptics were both right and wrong. According to the IEA, Saudi Arabia did increase its production but not to the degree promised. In July, despite Saudi officials worrying about the impact that the slowing economy and high petrol prices were already having on US driving habits, Saudi Arabia increased its output to 9.55m b/d, up 100,000, yesterday's report said. The Saudi increase, which could still prove to have been more generous as new shipping data is collected, coupled with higher volumes from Iran, helped push the 13-member group's total output to 32.8m barrels a day and the oil price to $114 a barrel. Opec's output in July was about 1m b/d higher than in April and significantly higher than the 31.1m b/d in the same month of last year. Whether Saudi Arabia and Opec will continue to work to reduce prices, or revert to keeping supplies off the market now that prices have fallen, will become clearer at the cartel's next meeting on September 9 in Vienna. Opec's production increase was not the only reason oil prices fell; demand curtailed by economic slowdown and high oil prices had also played a critical role, the IEA said. The IEA cut its global oil demand growth to 790,000 barrels a day, down from July's estimate of 890,000 b/d. Some of the demand in rich countries will be lost for ever, it noted, saying: "Even if retail prices ease, it seems unlikely that motorists who have purchased smaller cars will revert to gas-guzzling vehicles." But demand growth in emerging countries remained strong, with Chinese consumption rising above 8m b/d for the first time in June, hitting 8.3m b/d. The market is split about the direction of crude oil prices, but the previous general bullish sentiment is cracking. The IEA called it "too early to cite definitively a sea change in the market". Why a rich world lunch club will not crack the crunch, Page 9 Interactive graphic on inflation in some key economies and how central banks have responded, www.ft.com/inflationgraphic Copyright The Financial Times Limited 2008