NEW YORK/LONDON (Reuters) – Oil prices bounced back to 13-year peaks above $40 on Tuesday on doubts that top world exporter Saudi Arabia’s call for a rise in OPEC quotas would add much actual supply to a tight international market. U.S. light crude gained $1.17 to trade as high as $40.10 a barrel, the highest level since October 1990 after Iraq invaded Kuwait. London Brent crude was up over a dollar to $37.40 a barrel.

Saudi Arabia triggered a dollar slump in prices on Monday by proposing that the OPEC cartel raise official production limits by at least 1.5 million barrels per day (bpd) when ministers meet on June 3 to review policy.

Saudi Oil Minister Ali al-Naimi said the increase was necessary to cool sizzling oil prices that threatened to dent global economic growth. The cost of crude has jumped roughly 20 percent this year.

OPEC has come under strong pressure from major importing nations to bring down oil prices.

The International Energy Agency, which advises 26 industrialized nations on energy policy, welcomed the Saudi proposal but said the move was not enough to bring down runaway oil prices.

“I don’t think it will be enough as it will be a long process to cool the market, but it’s a first step and I am happy with this step,” IEA Executive Director Claude Mandil told a news conference.

OPEC is already pumping some two million bpd above its formal 23.5 million bpd output ceiling and the IEA’s Mandil questioned whether an increase in formal quotas would actually translate into higher supply.

Algerian Energy Minister Chakib Khelil said on Tuesday that Saudi Arabia is the only OPEC producer with the spare production capacity to implement the proposed increase in output quotas.

“The proposal for a 1.5 million bpd quota increase would only add about 500,000 bpd of production — which overheated markets could use,” said Adam Sieminski of Deutsche Bank.

Strong demand in China, low U.S. fuel supplies and an escalation of violence in the oil-rich Middle East have fueled oil’s price rise.

Oil analysts have raised their 2004 crude price projections by more than 10 percent in the last two months, as they try to keep pace with oil’s relentless upward surge, a Reuters poll showed on Tuesday.

A survey of 14 analysts forecast the average price of benchmark Brent crude at $29.94 per barrel, up from a projection in a March poll of $27.13 and above an average last year of $28.48 a barrel.

The poll predicted an average price for U.S. light crude this year of $32.72 a barrel, up from last year’s average $30.99 on the New York Mercantile Exchange.

Iraqi crude exports were disrupted at the weekend by sabotage to a pipeline carrying oil to the key loading terminal at Basra, target of failed suicide bomb attacks two weeks ago.

Iraqi Oil Minister Ibrahim Bahr al-Uloum said the sabotage cut Iraq’s exports from its Basra terminal in the south to 1.1 million barrels per day.

Exports from the terminal were expected to be restored to normal within 24 hours. Before the sabotage, Iraq was exporting 1.6 million bpd from the Basra Terminal, which is about 10 km (six miles) offshore.