/ 31 January 2008

Opec set to rebuff consumer appeal for more oil

The Organisation of the Petroleum Exporting Countries (Opec) on Thursday looked set to rebuff consumer calls for more crude oil, saying it was powerless to help stave off recessionary pressures in the West.

Enjoying a sixth year of crude price gains, Opec argues it can do little to help avoid a slowdown in the United States, its leading customer, which could curtail demand for Opec oil.

”I don’t see what increasing supply of oil will do to the economy; psychologically maybe it would help but I doubt it,” said Opec president Chakib Khelil ahead of Friday’s meeting.

”I think the market is well supplied and it’s not necessary to raise output,” said Iranian Oil Minister Gholamhossein Nozari.

The United States has led the appeal for more crude from Opec, saying that lower fuel costs would bolster an economy now sliding towards recession.

Opec raised supply in September but, for the second meeting since then, looks likely to disappoint expectations among importers for another increment to tame prices that broke $100 a barrel early this year.

US crude traded down a dollar on Thursday at $91,33 a barrel.

”Opec has already done more than was required from the last meeting when we increased supply by 500 000 [barrels a day],” said Khelil. ”I haven’t heard any country mention a production increase.”

Independent analysts estimate that leading producer Saudi Arabia is pumping about 300 000 to 400 000 barrels a day on top of its formal Opec allocation to meet robust winter demand.

Not gouging

Opec takes the view that it can do little to prevent a downturn led by the US housing-market crisis and the resulting credit crunch.

Khelil, Oil Minister for Algeria, said Opec had no power to influence turmoil on world financial markets and bore no blame for inflated energy costs.

”This crisis has nothing to do with the oil price, oil supply and demand,” Khelil told reporters. ”We have not gouged the world economy like some people think.”

Opec has no official price target and ministers are divided between price hawks keen to keep crude as high as possible and those who worry that $90 crude will slow energy demand growth.

”The majority of Opec ministers are not happy with the current high price but it is decided by the market,” a senior Opec delegate said.

Khelil estimated that psychological factors and geopolitics were adding a $30 premium to the ”real” price level warranted by the fundamentals of global supply and demand.

Annual average US crude prices have risen from near $22 barrel in 2002 to just over $72 in 2007, with this year’s average to date at $92,98.

With Friday’s decision seemingly a foregone conclusion, the price hawks in Opec are already lining up to push for a possible reduction in supplies when the 13-member group next meets in early March.

”With the lower seasonal crude oil requirement, then perhaps we should take off the market what we have been recently increasing,” a delegate from one of Opec’s bigger producers said. — Reuters