24-08-04

OPEC insisted that high oil prices were a result of speculation and vowed to provide enough crude to calm global markets, while an energy research group warned prices could remain high for some time.

"There are two main factors (for the price hikes), a fundamental one is the rising demand especially in China and India," OPEC Secretary General Maizar Rahman said. "We also have problems downstream" in the United States where refineries were working at full capacity, as well as non-fundamental geo-political factors in major producing countries like Venezuela, Nigeria and Iraq, the Indonesian OPEC official added. As a result "people say that $ 10 to $ 15 a barrel is due to non fundamentals, to speculation," Rahman added, repeating an explanation already put forward by the OPEC.

Oil prices eased off record highs, with New York's main contract, light sweet crude oil for delivery in October dropping 19 cents to $ 46.53 per barrel in early deals. In London, the Centre for Global Energy Studies said the global oil supply and demand situation could get tighter still, in turn keeping prices high.
"We are in the midst of an old-fashioned tight market, neither more nor less, and it could get tighter still," the think tank said in its August monthly oil report.

It laid blame for the problem at OPEC's door, saying that the cartel has refrained from adding to its capacity since 2000, disregarding market signals such as growing demand and rising prices.

OPEC is collectively pumping around 30 mm bpd, but could decide to increase its total by 1-1.5 mm bpd when it meets on September 15. According to OPEC president Purnomo Yusgiantoro, the cartel is waiting for other producers to follow Saudi Arabia's lead in utilising available spare capacity.

Rahman said: "OPEC is always trying to keep the market well supplied." While it would use its spare capacity to help meet demand, "the non fundamental (factors are) beyond OPEC's control," he stressed.

Other market experts agree speculation is a major factorkeeping oil prices high, though some analysts put its effect at between five and $ 10 a barrel. According to OPEC, its total production increased 10 % in 2003 from the previous year, with Iraq and Venezuela the only countries that did not boost output.

"Total OPEC crude oil production rose from 24.322 mm bpd in 2002 to 26.885 mm bpd last year, with only two member countries (Iraq and Venezuela) failing to record output increases," the cartel reported. "The organization's share in world crude oil exports improved from 47.2 % in 2002 to 48.7 % last year, while over the same period, its share of world oil production improved from 38 % to 40.1 %," it added.

Commenting on the current level of prices, OPEC chief statistician Muhammad al-Tayeb said "actual prices are below those of the 80's" when inflation and foreign exchange rates were taken into account.

He said OPEC held 78.3 % of the world's proven oil reserves and 49 % of those of natural gas.

Source: Agence France Presse