Geopolitics, not fundamentals, are driving crude to record levels
High oil prices not justified - Opec
April 19, 2006
By From Reuters and sapa-AP
Dubai - Opec believed that oil prices were too steep and that the rise was not justified by market fundamentals, a senior delegate of the oil cartel said yesterday after US crude futures set a fresh record.
The delegate said that there was no shortage of crude oil supply and that Saudi Arabia and other producers had pledged in the past to keep markets well supplied.
"Opec believes strongly that prices are too high, and nobody wants to see these prices," the delegate said. "It has nothing to do with fundamentals."
US light sweet crude hit a new high on concern that the West's nuclear row with Iran could affect exports from the world's fourth-largest oil producer and as major Nigerian supply disruptions dragged into a third month.
May crude was up 46c at $70.86 (R432.90) a barrel in overnight New York trade, 1c up on the previous record reached last August when hurricanes battered derricks and refineries along the US Gulf Coast. Brent crude futures also hit a record above $72 a barrel in London.
"Geopolitics are riding the price," the Opec delegate said, stressing that there was no shortage of oil in the market.
Opec ministers are set to gather informally this weekend at an International Energy Forum meeting in Doha.
On Monday Qatari oil minister Abdullah al-Attiyah said Opec was already producing at maximum levels and was expected to maintain its current output for the rest of the year if demand levels held and prices were still this high.
He was confident there would not be any supply disruptions from Iran, which pumps about 5 percent of the world's oil.
A senior Opec delegate said there were enough crude stocks and spare capacity to meet any unexpected supply shortage or increase in demand in 2006.
The prolonged shut-in of more than 500 000 barrels a day in Opec member Nigeria had resulted in "some distortion" in some refineries, the delegate said, but this was not a global issue.
Saudi Arabia has the lion's share of Opec's spare capacity. Riyadh maintains that there is not enough demand from refiners for the medium and heavy crudes that constitute the bulk of its unused output capacity for it to pump more.
In its monthly oil market report for April, released yesterday, Opec said: "With full preliminary figures available for 2005, global oil demand appears to have grown by almost 1 million barrels per day (bpd) to average 83.1 million bpd during 2005."
It said demand would grow "by 1.7 percent to average 84.5 million bpd" in 2006, slightly lower than the March estimate, due to "disappointing consumption in the US over the first three months of 2006 partially offset by an above-trend growth in western Europe".
The oil cartel's production was down 200 000 bpd in March, at an average of 29.6 million bpd.
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