Malaysia wants the fuel price issue to top the agenda at this month's meeting of the Organisation of the Islamic Conference (OIC) in Uganda, Foreign Minister Rais Yatim said today.

Malaysia would like to say, in our next meeting, this is the pivotal issue and no other topic would supersede this," Rais told a conference on bridging the gap between the Muslim World and the West.

Malaysia is the current chair of the 57-nation grouping, the world's largest forum of Islamic nations, which is to meet in Kampala in Uganda from June 18-20.

Rais said the Muslim world had to immediately focus on the energy crisis.

"Oil is being provided largely by the Islamic countries but they are more inclined to follow what OPEC says rather than to stress the importance of assisting the ummah (Muslim community) worldwide," he said.

Oil prices down

Meanwhile world oil prices eased today after an unprecedented surge that prompted consumer nations to urge a production increase and warn of a global recession in the face of the US$150 barrel.

New York's main oil futures contract, light sweet crude for July delivery, fell 66 cents to US$137.88 a barrel after making its biggest one-day jump ever on Friday. The contract spiked US$10.75 a barrel to close at a record US$138.54.

Analysts and a key member of the OPEC producers' cartel warned crude could soon hit US$150 a barrel.

Also on Friday in intraday trade, the benchmark contract crossed 137, 138 and 139 dollars for the first time and soared to an all-time high of 139.12.

Brent North Sea crude for July dropped 1.20 dollars to 136.49 a barrel after smashing barriers Friday in London. Brent hit a new intraday high of 138.12 before it eased back to settle at a record 137.69, up 10.15 dollars.

Both futures contracts far exceeded their prior record highs set on May 22 - 135.09 dollars in New York and 135.14 in London.

Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore, said the sharp jump in prices was a market overreaction to a confluence of factors.

"It is not surprising that there is a bit of a pullback after such a sharp increase. The increase in oil prices has nothing to do with supply and demand, and fundamentals did not change."

US unemployment rate up

Crude oil leapt in reaction to a new decline in the US dollar after the European Central Bank on Thursday signalled an interest rate hike and the US reported a sharp rise in unemployment on Friday, analysts said.

A report by the US Labour Department showed that the US unemployment rate rose unexpectedly by a half percentage point to 5.5 percent in May, the steepest increase in more than two decades.

Asian stocks tumbled on Monday after the surge in oil prices and the US unemployment numbers.

"Optimism about the US economy evaporated," driving investors into the oil market, Shum said, forecasting a "choppy period" for the near-term oil market.

The dollar was unchanged against the euro on Monday, at 1.5777 dollars in Asian afternoon trade.

A weaker greenback boosts oil prices because it makes crude relatively cheaper for buyers using stronger currencies, analysts said.

Compounding the dollar squeeze were reported remarks about Iran's nuclear programme by Israeli Deputy Prime Minister Shaul Mofaz. Analysts said the comments fanned fears of a Middle East conflict.

"If Iran continues its nuclear weapons programme, we will attack it," Mofaz told the Yediot Aharonot daily in Israel, stressing that such an operation could only be conducted with US support.

Ready for world recession

On Sunday, Iran's representative to the OPEC oil cartel warned the price of crude oil is set to rise even further to 150 dollars a barrel by the end of summer.

Iran is the number two exporter in the Organisation of the Petroleum Exporting Countries (OPEC).

On Friday, investment bank Morgan Stanley predicted that light sweet crude will hit 150 dollars by July 4 because of tight supplies.

Eleven nations that guzzle nearly two-thirds of the world's energy called Sunday for an urgent hike in global oil production.

Japan's energy minister Akira Amari, who hosted their meeting, warned the world could plunge into recession.

Australian Prime Minister Kevin Rudd in Japan Monday said the world's richest nations, must pressure oil-producing countries to increase output to deal with spiralling oil prices.

Iran's Oil Minister Gholam Hossein Nozari has said the market is oversupplied with oil and a production increase would not affect prices.

-AFP