OPEC Officials Say Speculation Leads Oil Price Rally
Thursday, 01 May 2008
Crude oil prices have soared to almost $120 a barrel because of investors speculating on commodities, OPEC members Kuwait, Libya and Qatar said. The Organization of Petroleum Exporting Countries has no plans to hold an emergency meeting before a scheduled September gathering, they said. "Now the fundamentals are not controlling the price, so there are other factors controlling the price,'' Kuwait's acting oil minister Mohammed al-Aleem said in an interview in Kuwait today. ``You cannot control the price, you cannot predict it, because there are reasons controlling the market other than the fundamentals of supply and demand.''
Crude oil futures reached a record $119.93 a barrel reached two days ago and were trading at $116.05 on the New York Mercantile Exchange at 1:32 p.m. London time. OPEC has rebuffed requests from consuming-nation politicians for more crude, arguing that supply is adequate.
Speculation, a weakening U.S. dollar, and insufficient refining capacity are influencing oil prices, al-Aleem said. Shokri Ghanem, the chairman of Libya's state-run National Oil Corp., also blamed speculation for record prices, echoing comments by other OPEC officials this month.
``It could at any time go up further, as fundamentals are not the ones controlling the market,'' Ghanem said at a conference in London yesterday. `Speculation may be the determining factor.''
Qatar Minister
Oil has surged 76 percent in the past year as investors purchased commodities as an alternative to flagging equity markets and the weakening dollar, which fell to a record low against the euro earlier this month.
``Every time the dollar falls, oil goes up as speculators just move to the oil markets,'' Qatari Oil Minister Abdullah bin Hamad al-Attiyah said in a phone interview from Doha today. ``What I hear today is panic about the oil price, nothing about supply.''
He ruled out any possible meeting because OPEC is powerless to act. ``There is nothing we can do because we are not seeing any shortage in physical oil,'' al-Attiyah said. ``We don't have the tools to do anything.''
Kuwaiti and Libyan officials said that OPEC was ready to meet if needed, before its next scheduled policy-setting conference on Sept. 9.
Before September
``From now to September there could be a meeting but I'm not sure,'' said Ghanem. ``There is no plan to meet,'' he said, adding that the group is ``ready to meet at any time.''
``We will not hesitate to meet'' if needed, Kuwait's al- Aleem said.
OPEC pumped 32.35 million barrels of crude a day in March, according to Bloomberg estimates, and kept its production targets unchanged at its last three meetings on March 5, Feb. 1 and Dec. 5.
The view of OPEC ministers differs from analysts. Former Saudi Arabian Oil Minister Sheikh Ahmad Zaki Yamani, who now heads a London-based think tank, said OPEC must increase output to boost global stockpiles.
``They have to increase production,'' Yamani, 77, chairman of the Centre for Global Energy Studies, said today. OPEC is ``keeping commercial stocks as dry as possible. They are producing only enough for consumption.''
Lower output from OPEC would eventually send oil prices to $200 a barrel, Yamani said. ``If they continue cutting production later on then, yes, it will happen,'' he said.
$200 Oil
Qatar's al-Attiyah said that oil prices could ultimately reach $200 a barrel because of a continued decline in the dollar's value, not a lack of supply. ``With respect to any analyst, I am not receiving any complaints from end-users.''
OPEC members need a clear vision for future oil demand and supply in order to make sufficient investments in developing new oil reserves, al-Aleem said.
``Stability in demand is essential,'' al-Aleem said. ``The difference in investment between low demand and high demand is $270 billion, that's the scenario.''
The Kuwaiti minister called on OPEC members to cooperate to stabilize oil prices during a speech at the World Islamic Economic Forum in Kuwait today, without saying how.
Kuwait is the fourth-largest oil producer among OPEC's 13 members, Libya ranks ninth and Qatar is the second-smallest.
Source: Bloomberg
