Oil prices pulled back from yesterday's peaks on reassurance from Opec that the oil producers' cartel would not cut production but remained above $51 dollars a barrel in New York and close to 16-week highs.

New York’s main contract, light sweet crude for delivery in April, fell 36 cents to 51.06 dollars a barrel in electronic deals. The March contract had surged $2.80 to close at $51.15 a barrel before expiring - the first time it has breached the $50-mark since November.

In London the price of Brent North Sea crude oil for delivery in April dropped 41 cents to 48.21 dollars a barrel.

Sheik Ahmad Fahad al Ahmad al Sabah, the Opec president who is also Kuwait’s oil minister, said the group would not allow prices to "surge to record levels."

Reacting to yesterday rise in prices, he said Opec would react to help cap any surge in prices. His comments tempered lingering concerns about a possible supply cut next month when Opec members gather in Iran on March 16.

The recent oil price spike has been supported by a cold snap in the United States and Europe and the weak dollar. Oil prices have risen around 50 per cent in the past year due to soaring global demand, supply concerns, speculative trading and a lack of refinery capacity.

Earlier this week a leading energy consultancy predicted that a cut in oil production by the Opec cartel would send the price of crude soaring. The Centre for Global Energy Studies gave warning that another reduction in Opec output could send the price of Brent crude surging as high as $55 per barrel.

The reported coincided with hints from the Saudi Oil Minister Ali al-Naimi gave more hints that leading Opec members were considering further action to curb a supply build-up.

However, there are indications that the market is looking past the March meeting and is starting to worry about longer-term supply.

"Spare production capacity has always been an issue, but if these global oil demand forecasts are on the money, can supply keep up?" Michael Guido of Societe Generale in New York told AFP.

"Opec seems to be at [maximum] capacity right now," he added.

"We saw prices go up a dollar in the morning based on colder weather and when we saw prices rally in the afternoon, some people blamed it on the dollar weakness," said analyst Deborah White of SG Securities in Paris.

"There is also the sentiment that demand growth is not slowing."

Speculative trading by hedge funds has also been credited with driving prices higher.

The dollar lost ground yesterday after the South Korean central bank said it was diversifying its foreign currency holdings. Today South Korea denied that it would sell the dollar to do so.

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