OPEC officials rule out oil output increase ahead of crisis meeting

Jun 18, 2008, 10:41 GMT

Doha - An increase in oil output by members of the Organization of Petroleum Exporting Countries (OPEC) is not needed as the current supply level exceeds demand and spiralling prices are mainly caused by speculators, OPEC officials told Deutsche Presse- Agentur dpa.

'Qatar sees no shortage in oil supplies in the market. If there was a shortage, we would see people in consumer countries standing in queues outside fuel stations,' Qatar's Minister of State of Energy Mohamed Salih al-Sada told dpa.

His view is shared by many OPEC officials, which dampens optimism about the outcome of a crisis meeting to be held in the Saudi port of Jeddah on Sunday between oil producers and consumers.

In calling the world's major oil consumers and producers as well as the chief executives of some of the largest international oil firms to the Jeddah meeting, Riyadh is recognizing the international climate disgruntled by prices jumping to unreasonable levels.

But resistance by other OPEC members to any output increase makes the Saudi task to defuse the international oil crisis harder.

'The market is well supplied. Algeria has even announced that it has unsold quantities of oil and other producers have not received any additional demand,' Qatari oil official, Ramzy Salman, told dpa.

Consumption levels are dropping across the world and economic growth is also slowing down, argues Salman, in support of keeping production at current levels.

'A time lag between crude oil purchases and distribution, which can reach between three and four months, is causing a drop in consumption by individuals and industries,' Salman said.

In the first three months of 2008, trading in oil futures has become an investment market with about 70 billion dollars being pumped into it mainly by investment funds, Salman said.

'Speculators are not refinery owners or oil producers but they are gamblers and risk-takers trading in money that is not theirs,' the expert said.

'Considering market fundamentals and production costs, the justified price of oil should be between 60 to 80 dollars per barrel, no more,' Salman estimated.

Algeria's Minister of Energy and Mines Shakib Khalil told dpa from Algiers that his country and OPEC would not increase oil output as current supply levels exceed market demand by 500,000 barrels per day.

Inventories in consumers countries are sufficient to meet demand, the Algerian minister said.

Algeria produces 1.45 million barrels per day.

Aside from speculators, skyrocketing prices are also blamed on geo-political factors, such as instability in production areas in the Middle East, and a weak dollar caused by the economic crisis in the US.

An Algerian oil expert, Abdel-Rahman Mabtul, blames high prices on fast economic growth in China, India and Russia, which has fuelled domestic consumption and demand there as well the dollar gradually decreasing against the euro.

The US dollar is the currency used in about 90 per cent of oil exports and 75 per cent of world trade, the Algerian expert explained.

The fuel consumption tax in consumer countries is also to blame for high prices along with the desire by oil multinationals and the US to keep prices high since low prices would lead to closure of many oilfields in Texas, Mabtul said.