CRUDE oil rose the most in three weeks after OPEC failed to reach an agreement on production targets for the first time in at least 20 years at their meeting in Vienna yesterday.
The crunch meeting of the oil cartel broke up in disarray without the expected agreement to increase crude output.
Futures increased as much as 2.8pc after Mohammad Aliabadi, the acting Iranian oil minister and current OPEC president, said the group will maintain current output for now.
Political turbulence in North Africa and the Middle East undermined the usual consensus at the meeting in Vienna and led to speculation that new internal rivalries could split the group, leading to even more market chaos.
Saudi Arabia, the world's largest oil producer and influential OPEC dove, was outmanoeuvred by Iran, Venezuela, Libya and others, later describing the summit as "one of the worst meetings we have ever had".
The price of Brent crude soared a further $1.65 to $118.43 a barrel as an expected OPEC agreement to raise its production quotas by about 1.5 million barrels a day failed to materialise.
The four west-leaning Gulf Arab states had proposed increasing daily output to more than 30m barrels, but they were outvoted by seven countries including Venezuela and Algeria who wanted them left unchanged.
Saudi Arabian Oil Minister Ali Al-Naimi, representing OPEC's biggest producer, said his country is ready to supply whatever the market needs.
Market analysts said there were genuine differences inside OPEC about whether the bout of very high oil prices could last and undermine the global economy or naturally fall back.
"One factor is a diverging market view. Another is politics," said analyst Samuel Ciszuk at IHS global Insight. "At times of heated politics and ideological debate, Saudi struggled to dominate as much as it could have given its size vis-a-vis others in OPEC."