Suspected militants shot at US military personnel in Saudi Arabia on Wednesday, adding to fears over stability that have sent oil prices to record highs since 22 people, mostly foreigners, were killed in an al-Qaeda attack.  

Saudi forces also killed two militants linked to the weekend shooting and hostage-taking spree on oil firms and Western compounds in the eastern oil city of Khobar, officials said.

They said the two were shot dead in a mountainous area near the western city of Ta'if, 700 miles from Khobar. Saudi forces had been hunting three militants who fled Khobar.

Security sources and diplomats said no Americans were hurt in the shooting outside a US military compound in Riyadh, but the incident exacerbated concern about security in Saudi Arabia, a key US ally and the world's biggest oil exporter.

US light crude prices peaked at a record US$42.45 a barrel in early trading -- the highest since futures were launched in New York in 1983 -- but fell nearly US$2 a barrel when producers led by the United Arab Emirates said they would raise output.

Riyadh said it would do everything it could to bring down prices that surged some six percent on Tuesday after the Khobar attack -- the second in a month on the Saudi oil industry.

In Beirut, Saudi Oil Minister Ali al-Naimi assured a meeting of the petroleum cartel OPEC that oil facilities in the kingdom were "very secure" but admitted the perception of insecurity in producing nations was a factor driving up prices.

Paranoia

Naimi said there were no guarantees OPEC could reverse an oil price scare that is being fueled by speculative investors.

"The main reason is because there is a perception of a future shortage as a result of instability in producing countries. There is no shortage now, but they are speculating."

"The paranoia about terrorism in the world threatening all the oil establishments in the world -- that's not true," the minister said. "I tell you I am confident that facilities in Saudi Arabia are very, very secure and they are protected very strongly to prevent anything happening to them."

The UAE said it would raise output by about 400,000 barrels per day, and Adel Al-Jubeir, foreign affairs adviser to the Saudi royal family, said the kingdom was determined to provide enough supply to satisfy the demand for crude oil.

"We believe the price of oil will trend downwards," Jubeir said. "It's clearly too high. It's clearly not acceptable and we're determined to do whatever we can with other OPEC countries to bring it down."

He said it was "obvious" that militants were targeting the kingdom's oil industry to create chaos, but that it would be very difficult to penetrate Saudi oil installations. "The oil installations are very, very secure," Jubeir added.

A Saudi diplomat said the authorities were "upgrading, tightening and fortifying security."

Osama bin Laden's al-Qaeda network, which has pledged to drive out all "infidel" Westerners from the birthplace of Islam, claimed responsibility for the massacre.

The US Embassy said that in Wednesday's incident the gunmen had fired at two cars in which Americans were traveling. It said the driver of one vehicle, a non-American, was slightly wounded, but the cars returned to Iskan village where a US training unit working with the Saudi National Guard is based.

Saudi media said a Saudi was slightly hurt. Security sources said the militants had automatic rifles and fled the scene.

Washington last month urged the 35,000 Americans living in Saudi Arabia to leave, citing possible militant attacks.

Saudi Arabia has been battling al-Qaeda militants for over a year and the group's local leader, Abdulaziz al-Muqrin, has vowed 2004 will be "bloody and miserable" for the kingdom.

(China Daily via agencies, June 3, 2004)