Ah, the wonders of supply and demand. On the supply side:

Saudi Arabia Oil Minister Ali al-Naimi said on Sunday the world oil market was oversupplied and that the kingdom had reduced production in March due to weak crude demand.

Oil consumers have urged OPEC to quickly add supply to the market to quell the rally in crude prices that has taken oil to its highest level in two and a half years amid unrest in North Africa and the Middle East.

Other OPEC ministers have insisted the market is well supplied and there is nothing the group can do to stop prices from going higher while there is not unmet demand for crude.

“The market is overbalanced… Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don’t know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied,” Naimi told reporters.

And now for the demand side:

Oil prices are roiling financial markets, hitting the economy and forcing investors to re-examine their portfolios.

Oil prices closed at $109.66 a barrel on Friday, up more than 31% in the last year. They’re up from a low of about $84 in February and are near levels not seen since September 2008, before the economic downturn.

Behind the spike in oil: Unrest in the Middle East, including continued fighting in Libya. At the same time, improving economic prospects in the U.S., including a slowly improving job market, suggest that energy demand will grow.