15-08-04

OPEC can do nothing to quench scorching oil prices when markets are already oversupplied by 2.8 mm bpd of crude, Iran's OPEC governor said, warning that prices could fall sharply.

"Now there are more than 2.8 mm bpd of crude more than demand," Hossein Kazempour Ardebili was quoted as saying. "There is no reason for OPEC members to increase production," he added. "This organisation is unable to do anything at present."

Oil futures prices raced to record highs, further boosted by a US refinery fire, underpinned in a long term rally but soaring demand led by China and fears of disruption to supply, particularly in Iraq. US crude oil futures hit $ 46.65 a barrel, the latest peak in a series of record highs in all but one of the last 11 trading sessions.

Iran is OPEC’s second-biggest producer but like all its fellow members but for Saudi Arabia, it has no spare capacity left to contribute to a further rise in OPEC’s production after the group's most recent 2.5 mm bpd quotas hike agreed in June. Iran's attempts to lift capacity further are weighed down by cumbersome investment deals.

"It seems that prices will continue to go up without taking into consideration the basic elements of the market, supply and demand," Kazempour said. "The current trend of prices stems from political and military developments."

He reiterated that oil prices could still crash if security fears subsided.
"If a calm political and military situation prevails in the market, the amount added to crude reserves will pressure the price," he said.

The Organisation of the Petroleum Exporting Countries, due to meet next on September 15, is already pumping at a 25-year high of 30 mm bpd, casting aside the restraint of official quotas. Saudi Arabia is producing around 9.5 mm bpd, against a quota of 8.45 mm bpd, and is expected to reach near 10 mm bpd in September.

Iran, however, is straining to produce nearly 4 mm bpd against a quota of around 3.8 mm bpd. Saudi Oil Minister Ali Al Naimi pledged to stop high oil prices from stunting world economic growth, and thereby cutting demand for its oil in the longer term.

Source: Khaleej Times