Oil prices soared to fresh highs of more than $126 this afternoon, lifted by a new round of speculative buying after Opec brushed aside US calls for an increase in production, insisting that the market remained well-supplied.

New York’s main oil futures contract, light sweet crude for June delivery, touched a high of $126.20 while London’s Brent crude contract hit an all-time record of $125.90. Oil prices have risen 25 per cent since the beginning of the year and more than doubled compared to this time last year when it was trading at $62 per barrel.

Today’s rally was driven largely by speculative buying from funds, following comments by Abdalla Salem El-Badri, secretary general of Opec, the cartel of 13 countries which produces 40 per cent of the world’s oil, who said: "There is clearly no shortage of oil in the market."

At the same time, there are concerns that violence in Nigeria will also impact production. Royal Dutch Shell Plc's Nigerian output, which was cut by militant attacks, is likely to return within two weeks, a government official said yesterday. Shell is losing about 164,000 barrels a day as a result of political violence in the country.

Opec’s current output is around 32 million barrels per day, compared with global production of 85 million barrels. El-Badri also underscored Opec's view that price volatility has been driven by speculation by hedge funds.

Times Recommends

• Tories’ green bank to revolutionise power policy
• UK car industry receives £2.6bn injection
• Pru chief turns down seat on board of bank