Thursday, April 7, 2011

OPEC unable to rein in $120 oil-ministers

PARIS: OPEC ministers on Wednesday, April 6 brushed aside worries that high fuel prices would slow economic growth, saying there was little they could do to rein in $120-a-barrel crude.

Iraq's Deputy Prime Minister for Energy Affairs Hussain al-Shahristani, a former oil minister, said the Organization of the Petroleum Exporting Countries (OPEC) had done everything to calm the rally.

"All that OPEC can do is provide the market with the oil it needs and it is doing that," he told reporters at a Paris oil conference. "We have not seen any slowdown in growth."

Brent oil briefly traded above $123 a barrel, its highest since August 2008, prompting another warning from the International Energy Agency (IEA), an oil watchdog for the major Western economies.

"Oil at $120 or more has an effect on economic activity. We have seen similar levels during times of economic slowdown, if not recession," IEA Deputy Director Richard Jones told Reuters in Dubai.

Qatari Energy Minister Mohammed Saleh al-Sada, in New York for a conference, said world oil supply and demand were balanced, and OPEC could do little to curb a price surge, blaming it on financial speculators.

"The fundamentals are all okay with regards to supply," he told Reuters. "The stocks are all at a healthy level. With regards to speculation, that is nothing that OPEC can do anything about. But apparently that is the main reason why oil prices are at these levels."

Asked if OPEC would increase production when it meets in June, Sada said: "Raising output will happen if there is a problem with supply, and that is not the case."


The IEA and OPEC remain at odds on the root causes of soaring crude prices. The IEA points to roaring demand from Asia and a reviving West.

"The price began rising in the fourth quarter of 2010 because demand exceeded supply by 1.1 million barrels per day (bpd). At that point, stocks were falling and companies were willing to pay more for oil," said IEA's Jones.

OPEC sees an oil market divorced from the realities of supply and demand, driven by political upheaval, fear and financial speculation.

"There is little we can do in terms of price control," said UAE Oil Minister Mohammed bin Dhaen al-Hamli at the Paris conference. "International markets are choosing to ignore market fundamentals and bet on the worst-case scenarios."

OPEC, which exports more than one-half the world's internationally traded oil, has resisted calls for an emergency meeting before its next scheduled conference in June in Vienna.

But members of the group with spare capacity, including leading producer Saudi Arabia and the United Arab Emirates, have already increased output in response to the supply disruption from Libya. - Reuters

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