Saudi King Abdullah yesterday announced at an international summit on the oil crisis that the kingdom will churn out 9.7 million barrels a day, a rise of more than 200,000 barrels over last month.

The country's Petroleum Minister Ali I. Al-Naimi, said the increase will take place next month. He added that the government will invest in oil projects that would allow the nation to produce 12.5 million barrels per day by the end of the year.

The Saudi monarch, who also said Riyadh would give US$1.5 billion (S$2 billion) dollars to efforts to ease energy shortages in poor countries, told the 36-nation summit that Saudi Arabia was 'very concerned' about consumers everywhere.

He blamed increased oil consumption and taxes for high fuel prices, but added: 'Among other factors behind this unjust increase in oil prices is the abhorrent act of speculators seeking to undermine the market.'

Fellow oil-cartel member Kuwait was quick to back the move, with Oil Minister Mohammed al-Olaim telling reporters: 'Opec will not hesitate to make any increase in production if the market required that.'

But observers felt the production increase alone was unlikely to do much to calm prices which have doubled to US$140 over the last year, while the announcement of the hike opened divisions among Opec members.

The Jeddah summit has seen a debate over whether production shortfalls have caused the high prices, as the United States and other Western powers say, or 'speculators' have pushed up the cost, as Opec insists.

Opec president Chakib Khelil went as far as calling Saudi Arabia's move 'illogical', as refiners do not need more crude.

Mr Khelil, who is also Algeria's Oil Minister, said: 'We believe the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply.

'We believe speculation, in its noble and not noble terms, has its impact.'

He said much of the price explosion can be explained by currency market turbulence. 'A lot of people are talking about the uncertainties about the reserves. But what about the uncertainties on the dollar?'

He said Opec would only consider a production increase at a regular meeting in September.

A Saudi source said there is scope for other countries to follow his country's production increase as there are up to three million barrels of spare capacity within Opec nations.

Meanwhile, British Prime Minister Gordon Brown, the senior Western leader at the summit, called for a 'new deal' between consumers and producers.

But, like many Europeans at the meeting, he said production shortages and speculation had to be studied.

He said that the world was going through 'the biggest of all three oil shocks' in recent decades.

AGENCE FRANCE-PRESSE, REUTERS, BLOOMBERG