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Apr-21-2008Oil Reaches Record as OPEC Says It Doesn't Need to Raise Output(topic overview)
CONTENTS:
- ROME (Reuters) - OPEC could increase output if there were a need for its oil, acting Kuwaiti Oil Minister Mohammad al-Olaim said on Sunday. (More...)
- The global wave of inflation affecting commodities and the current global economic crisis have nothing to do with oil prices. (More...)
- The price of oil produced by OPEC countries hit a record high of 106.65 dollars per barrel, the cartel said yesterday. (More...)
- "Today, there is no need to get worked up and say, 'We must put more oil on the market', because the demands of oil consumers are probably motivated by political reasons," said Saudi Oil Minister Ali-al Naimi. (More...)
- The trouble with hydrocarbons is that we cannot simply phone up the wholesaler and replace them, hopefully for a cheaper price. (More...)
- The IEBF provides a platform for discussion between energy ministers and heads of international oil companies. (More...)
- The over looked factor is the contribution of OPEC countries to the present oil crisis. (More...)
- The chairman of Libya's National Oil Corp. says the world economy can cope with rising crude prices, which may top $120 next week. (More...)
- As a wealthy country, Australia can no doubt out bid other countries for oil for a number of years. (More...)
- A smaller than normal build-up in global inventory is anticipated. (More...)
- The impact of sharply higher oil prices; and possibly outright shortages, are likely to severely impact the Australian economy. (More...)
- Pressure from consumers to raise output is "probably politically driven,'' oil newsletter Argus reported yesterday, citing al-Naimi. (More...)
- No wonder, prices have set new highs at the front end of the curve; and far forward values too are high still. (More...)
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ROME (Reuters) - OPEC could increase output if there were a need for its oil, acting Kuwaiti Oil Minister Mohammad al-Olaim said on Sunday. "If there is a need for OPEC to take a decision, we will increase," he told reporters at the International Energy Forum conference. OPEC oil ministers have said they would be prepared to supply any market needs for oil but have seen the market as sufficiently well supplied. He reiterated his view that record high oil prices did not reflect the realities of supply and demand. "What we are seeing up to now is that the inventory and the stocks are not really affecting the price in the market," he said. [1] Al-Naimi, Scaroni and el-Badri are among more than 40 company chiefs and 90 energy ministers attending the energy forum in Rome, which started today. Industry leaders will discuss investment, resource nationalism and sustainable development as rising energy costs push some consumers, such as airlines, to bankruptcy. Kuwait's acting Oil Minister Mohammed al-Aleem told reporters in Rome today that OPEC can increase supply "if there is a need.'' When asked about the possibility of an additional meeting before OPEC's next scheduled policy-setting conference in September, al-Aleem said: "If there is a need for a meeting, they will meet for sure.'' Customers aren't asking for more crude though, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said as he arrived in Rome yesterday, blaming the plunging dollar for record prices. "The oil price rises as the dollar gets weaker,'' he said.[2]
Visiting OPEC Conference President and Algeria's Energy and Mines Minister Chakib Khelil told KUNA the increase could mainly come from Saudi Arabia, adding that other countries like Algeria, Libya, Venezuela, and Nigeria could also contribute in the raise. Talking to reporters during his visit to Kuwait Chamber of Commerce and Industry (KCCI), Khelil said that the hike in oil prices is a result of economic crisis in the U.S. and the decline of the U.S. dollar's exchange rate. He pointed out that the price of oil increases by USD 4 whenever the dollar's exchange rate decreases by one percent. If the U.S. economy improves by the end of 2008 or early 2009, oil prices would decline, he noted.[3] The persistent stability of market supplies attributed to the flexibility of OPEC states has created a state of separation between the oil market (demand and supply) and its prices. This is caused by the depreciating dollar and speculations as investors resort to oil and commodity markets to secure high and quick profits away from the fluctuation of currencies and stock prices, yet in doing so, they contribute to the continuous increase in oil prices. At this point, it is worth mentioning an important prediction issued by OPEC and the International Energy Agency in the past few days over the possible decline in oil demand in the coming few months as a result of the slowing global economic growth. What implications do these have developments for OPEC? First, these developments and predictions confirm the correctness and credibility of the statements made by OPEC ministers about the sufficient oil supplies in the market and the warning that any significant increase in supplies can depress prices, especially with the expected decline in demand in 2008. This confirms the second claim made by OPEC ministers that current prices do not reflect market fundamentals, but are rather the result of speculations and the depreciation of the dollar.[4] Calls for OPEC to raise output were distinctly muted, even if the deputy head of the International Energy Agency -- founded during the 1973-4 oil crisis to defend the energy interests of 27 major consumer countries -- said it was "unreasonable" for the 12 members of OPEC's cartel to "fix demand for the next 30 years". William Ramsey later softened his position to say that "asking for more fuel today maybe isn't the answer," spelling out that that IEA is primarily asking producers to "increase their production capacity". "I think that prices are going to continue to rise," said Libya's acting oil minister Chukri Ghanem, the head of its national oil company. The Gulf states, particularly Saudi Arabia, said they did not like the price spiral. A Gulf official told AFP: "we don't like to see the prices at these (high) levels". He did not give the slightest hint of any measures OPEC could enact to make prices fall again.[5] Calls for OPEC to raise output were distinctly muted, even if the deputy head of the International Energy Agency - founded during the 1973-4 oil crisis to defend the energy interests of 27 major consumer countries - said it was "unreasonable" for the 12 members of OPEC's cartel to "fix demand for the next 30 years". Both Kuwait and Qatar's oil ministers underlined OPEC's common position that there are ample reserves of fuel available at the world's pumps.[6]
ROME (AFP) — Oil-producing countries have rejected calls to raise output amid record prices -- five times higher in as many years -- saying the rise in demand was artificial. Kuwait's acting oil minister said Sunday that supply and demand factors are not to blame for the soaring price of crude oil, which hit record highs above 117 dollars per barrel in New York last week, following a pipeline attack in Africa's biggest producer Nigeria.[5] ROME (Reuters) - Oil prices, which have struck a record of $117 a barrel, could rise higher still, OPEC Secretary General Abdullah al-Badri said on Sunday. Factors other than supply and demand were pushing oil prices higher, he said, and the main one was the weakness of the U.S. dollar. "As long as there are other factors contributing to the market, we may see higher prices," he told reporters on the sidelines of talks between producers and consumers in Rome. Asked whether the high price was affecting demand, he said it could be having an impact in the United States, but was not in Asia and developing countries. "In some parts of the world, yes, but in other parts, it's business as usual," he said, when asked whether demand was weakening.[7] OPEC Secretary General Abdullah al-Badri reiterated on Saturday that ministers from OPEC member states did not need to meet on the sidelines of the Rome energy forum, despite soaring prices. Khelil, on his part, said the falling value of the U.S. dollar was responsible for the surge in oil prices.[6]
Speaking during a visit to Kuwait, Khelil noted that a previous increase in production did not bring prices lower. 'We raised output last year and there was an increase in prices, not decrease,' he said, adding that the falling value of the U.S. dollar was the main reason for the spike in oil prices. Khelil said OPEC wanted an "appropriate" price, suiting both consumers and producers, saying only that "What is appropriate for buyers and sellers."[8] The contract on April 18 rose $1.49, or 1.3 percent, to $113.92, after reaching a record $114.22. The growing concerns about a slowing U.S. economy and higher gasoline price may lead to even lower demand for oil in the second quarter, a time when oil demand falls, OPEC said in its monthly report on April 15. Any increase in output won't affect prices because there is a "balance'' between supply and demand,'' Khelil said, as quoted by Kuwait's state news agency. "There are those that make that argument that say the market isn't tight; the contrary view is that the supply side, particularly outside of OPEC, is fragile,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "From OPEC's point of view, they don't want to add oil into the market and create a temporary surplus.''[9] April 20 (Bloomberg) -- The Organization of Petroleum Exporting Countries doesn't need to raise oil production and any increase will not affect prices, officials including the group's president, Chakib Khelil, said. "Any increase in production now will not have an impact on prices because there is a balance between supply and demand,'' Khelil said during a visit to the Kuwait Chamber of Commerce and Industry, Kuwait's state news agency reported today.[2] There is no shortage of oil in the market, Secretary- General Abdalla el-Badri said yesterday in Rome, blaming the weak dollar and speculators for high prices. Even if the Organization of Petroleum Exporting Countries raises production, "we will not find people to buy the increment,'' President Chakib Khelil said, as cited by Kuwait's state news agency.[9] Organisation of Petroleum Exporting Countries (OPEC) president Chakib Khelil, currently touring Kuwait, said there was no need for an immediate hike in production. He said the cartel, responsible for producing around 40 percent of the world's oil, "does not need to raise output in the near future," according to Kuwait's KUNA news agency.[5] The Organisation of Petroleum Exporting Countries (OPEC) sees no need to raise oil production to counter high oil prices, OPEC's President said on Sunday.[10]
Secretary-General of Organisation of Petroleum Exporting countries Abdullah el al-Badri has said oil prices would likely go higher. Speaking to newsmen on the sidelines of an energy conference in Rome, he said, the OPEC will not hesitate to increase production if the group thought the higher prices.[11] The OPEC chief said the Organization for Petroleum Exporting Countries "will not hesitate" to increase production if the group thought the higher prices were due to shortages. He said more oil will not solve the high prices. OPEC's production levels were just one of many factors, he said. "But how much higher it will go, of course it depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries.[12]
International oil market analysts attribute the high prices mainly to the large amount of speculation in the commodity market, inspired by the weak dollar. 'The U.S. dollar's weakness against major currencies inspired increased investment in the commodities market, particularly for crude oil, pushing prices to record levels,' OPEC (Organization of Petroleum Exporting Countries) said in its monthly report published Tuesday.[13] Organisation of Petroleum Exporting Countries (OPEC) has also blamed speculation on a weak dollar contributing to the oil price hike.[14] Oil Ministers from the 12 Organisation of Petroleum Exporting Countries (OPEC) join chief executives of major producers in Rome for an International Energy Forum that begins on Sunday.[15] New York sweet crude climbed to an all-time high of $117, before closing at $116.691 a barrel while London Brent crude hit an unprecedented $114.22 but later closed at $113.92. Ghanem added that the Organization of Petroleum Exporting Countries (OPEC) believed the markets were well-supplied, adding "OPEC is not pricing oil, it's the futures markets."[16] Crude oil futures have doubled in three years, touching a record $116.97 a barrel on April 18 in New York. High prices are caused by an economic crisis in the U.S. and the decline of the value of the U.S. dollar, he said.[2] VIENNA' OPEC's average daily oil prices have set records 16 times since the beginning of this year and soared to 106.65 U.S. dollars per barrel (dpb) Wednesday, the Vienna-based cartel said Thursday.[13]
OPEC's expectations about "reasonable oil prices," as well as statements of some member countries that the prices have not significantly deviated from the reasonable level, are making analysts more skeptical about the cartel's readiness to curb the current high prices with an output increase. OPEC has said that world oil demand this year is forecast to grow by 1.2 million barrels daily to an average of 87 million barrels per day.[14] Driven by China the demand for oil globally now appears to sit around 87 million barrels per day, slightly up on figures for 2007 and up around 1.2 million barrels per day on the same time last year. This has been driven by consumption from China and India where both countries are showing how wrong some market forecasters can be. The idea of 'price elasticity', in that when prices reach a certain point demand dies, are being ridiculed by the way these two countries are consuming hydrocarbons. Put simply, they are only starting to buy the product and they see current prices are nothing more than the going rate. Rather as when Biro pens started off they cost the equivalent of $500 people still paid for them. There was no elasticity in Biros because people thought that is what they cost, so that is what they paid. This is what China is doing right now. The same thing has happened with every branch of consumer culture in the West.[17]
Speculation is probably adding about $20 a barrel to today's oil price, Shokri Ghanem, chairman of Libya's National Oil Corp., said in a Bloomberg Television interview late yesterday in Rome. 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.[2] OPEC leaders meeting in Rome today are expected to reject calls from the West to increase oil production in an attempt to calm record oil prices.[18] Oil prices hovered near record highs set last Friday, supported by concerns of supply disruptions in Nigeria and comments by OPEC that it saw no need to increase production.[19] PERTH (Reuters) - Oil held below $117 a barrel on Monday, supported by worries of supply disruptions in Nigeria and comments by OPEC that it saw no need to increase production.[10]
Kuwait City: Opec members see no need to raise oil production to counter rising prices, the Opec President said on Sunday.[20] "The level of stockpiles does not currently affect prices on the world market," Mohammad al-Olaim said on the sidelines of an energy forum in Rome attended by oil-producing countries, companies and consumer nations. "The fundamentals do not affect the market," he said. "If there is a need to raise" production, ministers of OPEC -- of which Kuwait is a member -- "will make a decision," he added.[5]
"No," said Chakib Khelil, who is also Algeria's Energy and Mines Minister, when asked by reporters whether OPEC should raise production. "There is a balance between supply and demand," he said, speaking during a visit to Kuwait.[21] "No," said Chakib Khelil, who is also Algeria's Energy and Mines Minister, when asked by reporters whether OPEC would raise production. He added that raising production would have no impact on prices as the market was well-supplied.[10]
Opec President Chakib Khelil, who is also Algeria's Energy and Mines Minister when questioned on Opec's production plans said: "I don't think that any increase in production will have an impact on prices.[20]
The global wave of inflation affecting commodities and the current global economic crisis have nothing to do with oil prices. The causes behind the rising prices of foods include result from many factors; the rising standard of living standards in major Asian countries such as China; the commercial production of bio-fuel in the United States which has diminished the area of agricultural plots dedicated for growing wheat and barley, and hence the shortage in the supplies of wheat available for bread and pastas; the rise in international prices despite the expansion of areas dedicated for the growth of corn since huge amounts of the produce have been allocated for the production of bio-fuel rather than as animal feed, and this in turn has led to a decline in the volume of meat supplies in the market and to price increases. The international economic crisis, on the other hand, is attributed to the sub-prime mortgage crisis in the U.S. as it is well-known, to the lack of transparency surrounding these mortgages. The seriousness of this crisis that has according to preliminary estimates cost up to one trillion dollars is that its actual extent remains unknown and that it is expected to expand in the future to include credit card debts. [4] Confronted with rising oil prices, OPEC has thrice declined to increase output since last December. It also insists that the economic recession in the United States will influence global economic growth and result in a decline of world demand for crude oil.[13] U S President George Bush and his officials had repeatedly pleaded with OPEC nations to increase output. It also insists that the economic recession in the United States will influence global economic growth and result in a decline of world demand for crude oil.[14]
OPEC which has oil reserves that constitute 80 percent of the total global reserves is unwilling to increase output to bring down the prices. Therefore the balance of international crude oil supply and demand remains tight.[14] OPEC tends to limit production to maintain current prices. Its proven oil reserves comprise nearly 80 percent of the global total, with its crude oil output accounting for about 40 percent of the world. It therefore plays a decisive role in stabilizing supply and demand on the international market.[13]
OPEC countries account for 40 percent of the global crude oil output. Despite its decisive role in stabilizing prices, OPEC has thrice declined to increase output since last December.[14]
OPEC's expectations about 'reasonable oil prices,' as well as statements of some member countries that the prices have not significantly deviated from the reasonable level, are making analysts more skeptical about the cartel's readiness to curb the current high prices with an output increase.[13] Thirdly, despite the importance and correctness of the two abovementioned claims, there remains another inevitable fact that oil producing countries. By virtue of its role as a major and successful international economic institution and the fact that it deals with a strategic commodity such as oil, OPEC has to take effective actions rather than adopt a passive policy toward developments in oil prices, especially as these developments have taken the initiative from OPEC. Such a policy is needed even as the huge and evident benefits resulting from rising oil prices have surpassed all expectations.[4] Evidently, no additional crises and problems are needed, especially in Arab countries. Fourthly, it is certain that oil prices sustained at these high levels will lead to accelerating the development and using alternative energies. It is not surprising today to see hybrid cars on the roads of western industrial countries and Japan running at 80 km per gallon. These alternatives do not constitute a threat to the oil market in the foreseeable future, especially with respect to the transportation sector. The persistence of international economic crises over long periods of time and the potential of their escalation along with the daily and irrational rise in oil prices may lead to unanticipated surprises, let alone the general feeling among the public that oil plays a role in these developments.[4]
"Oil consuming countries must take action to improve energy efficiency and promote alternative energy uses,'' Brown said in an April 16 speech in London. "But with the oil price now at $100 a barrel, both oil producing and consuming countries share common interests for the stability of the global oil market.''[2] At the Amsterdam meeting in 2004, OPEC ministers voiced concern oil prices would reach $50 a barrel and Saudi Arabia announced unilaterally that it would pump as much oil as it could. By the time of the Doha IEF meeting in 2006, OPEC ministers were saying there was nothing they could do to halt oil prices of more than $70 a barrel.[22] The U.S. and other western countries have been pressuring the 13 Opec nations, in particular Saudi Arabia, to crank up production to avoid oil prices spiralling ever higher.[18] ROME (AP) — OPEC Secretary-General Abdullah el al-Badri said Sunday oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply — something he doubted.[12]
Rome, 18 April (AKI) - With oil prices posting record highs, government and corporate leaders will meet in Italy on Monday for a crucial meeting to discuss the need for new energy supplies and ways to reduce production costs.[23] Oil prices are "too high'' and are affecting the economies of developing nations, Nobuo Tanaka, executive director of the International Energy Agency, said April 19 in Rome. He called on OPEC to allow fuel inventories to build.[9] OPEC Secretary-General Abdalla el-Badri also blamed the weak dollar and commodity speculators for high prices. "As long as these factors keep contributing to the market, we may see higher prices,'' OPEC's el-Badri told reporters today in Rome, where he is attending the three-day International Energy Forum, a biennial meeting of officials from energy producing and consuming countries.[2] Opec ministers have refused to review output ahead of today's meeting of the International Energy Forum (IEF) in Rome.[18] ROME: OPEC Secretary-General Abdullah al-Badri said on Saturday he did not think OPEC ministers will meet together when they attend the International Energy Forum here. "I don't think there will be any meeting," he told reporters on his arrival for the April 20-22 IEF conference.[24]
Oil minister in Rome to attend IEBF, IEF meetings TEHRAN (IRNA) - Iran's Oil Minister Gholam-Hossein Nozari, heading a delegation, arrived in Rome on Saturday to attend the 11th session of International Energy Business Forum (IEBF) to be held in the Italian capital on April 21-22.[25]
Since 2004, the IEF has been accompanied by the International Energy (otcbb: IENI.OB - news - people ) Business Forum (IEBF), which provides a platform for discussion between energy ministers and heads of international oil companies.[22]
Representatives of some 60 exporting and consumer countries meet every two-year at the International Energy Forum. They include members of the Organization of the Petroleum Exporting Countries, which pumps about a third of the world's oil. The IEF describes itself as ""the largest global gathering of energy ministers"" and says its particular approach aids development of contacts and understanding on the key issues.[25] The biennial Forum will take place from April 20 to 22 and is being hosted by the Italian Government with India and Mexico as co-hosts. This year the Forum will address the theme of 'Energy Dialogue to Respond to Global Challenges'. Energy ministers from both energy producing and consuming countries will participate. They will be meeting at a time of unprecedented high energy prices and increasing concern over energy security and global warming as well as geopolitical tensions affecting the energy situation in the world. All participants are keen on a frank and informal exchange of ideas that uniquely characterizes this forum. Environmental and economic development issues related to energy are also to be discussed in these meetings.[26] IAE welcomes OPEC model gas cartel International Energy Agency said an OPEC model gas charter is feasible but could not come to market for at least 10 years. According to William Ramsay, the deputy head of the IEA, gas grouping would make the informal club of major gas exporter'''s official, and could be a reality once the gas market changes its management and supply structure. Regional management and long-term contracts may hinder its formation to at least the next ten years. Earlier, Russia has hinted at its interest in the creation of an Opec-style gas group, which Europe and the U.S. have warned against, saying it could pose a danger to global energy security. Russia, the world'''s largest gas exporter, and Iran, Qatar, Venezuela, Nigeria and Algeria have said their annual gas forum aims at increasing co-operation between key producers.[27] The result of Russian problems has been a mark down in the non-OPEC supply by the International Energy Agency (IEA) and OPEC, by around 100,000 barrels per day for 2008. Other numbers that have been thrown in the mix include U.S. gasoline demand that simply will not die. It is up 1 per cent year on year in March as the U.S. fails to find another way to transport itself around the country.[17]
The price of oil produced by OPEC countries hit a record high of 106.65 dollars per barrel, the cartel said yesterday. [28] Oil prices hit record highs above 117 dollars per barrel in New York, following a pipeline attack in Africa's biggest producer Nigeria.[6] Crude oil prices have now reached a record $117 a barrel after a five-day run fuelled by supply woes and the weak dollar.[18] NEW DELHI: The analysts have blamed the weak dollar as the major cause for rising crude oil prices.[14]
Experts, therefore, point out that only when expectations about the U.S. dollar's depreciation completely break down can international oil prices truly step on a downward track. Some experts say other aspects besides the weak dollar are also responsible for pushing oil prices up dramatically and they would continue to wield an influence on international oil price trends.[13] Separately, OPEC Secretary General Abdullah al-Badri said oil prices could rise higher still should the U.S. dollar weaken further.[19] Oil prices have jumped 22 percent since the start of the year largely due to a tumbling U.S. dollar, geopolitical tensions in the Middle East and unrest in major oil exporter Nigeria.[10]
"Even if we raised the production we may not find a buyer," Khelil added. He referred to a an increase in output last year that failed to reduce prices, and added that the falling dollar was a main factor behind the surge in oil prices.[20]
The present price level has little to do with rampant speculation, as erroneously believed. In sensitive and critical commodities such as crude, producers follow a pricing policy that helps skim the market but does not lead to demand compression. That's why OPEC is cautious in its output policy, which ensures just about adequate supplies or a marginal shortfall so as to keep the mood buoyant. These markets do not work on a traditional 'cost-plus' basis. If Mr Chidambaram laments that crude market rates are unrelated to the cost of production, he would be aghast if told about the cost and price dynamics of palm oil.[29] April 21 (Bloomberg) -- Crude oil rose above $117 a barrel for the first time in New York after OPEC said it will maintain production, rejecting calls from the U.K. and Japan to boost output.[9] The OPEC price is tied to benchmark prices for light sweet crude oil, the highest quality crude, which are set on the main oil exchanges in London and New York.[28]
Crude oil for May delivery rose as much as 36 cents, or 0.3 percent, to $117.05 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since futures started in 1983.[9] New York's main oil futures contract, light sweet crude for delivery in May, was four cents higher at 114.97 dollars after a record close of 114.93 dollars on the New York Mercantile Exchange on Wednesday.[28]
Brent crude oil for June settlement was at $113.91 a barrel, down 1 cent, on London's ICE Futures Europe exchange at 10:53 a.m. Singapore time.[9]
According to the Finance Minister, the price of crude (currently at around $110 a barrel) does not reflect either the cost of production or risks inherent in the market, and not even the interplay of demand and supply. Diversion of food crops for bio-fuels resulted in food inflation that hit the poor nations the hardest, he asserted. While Mr Chidambaram's concern over high prices may be justified, going by media reports, it may be safe to infer that he was perhaps not fully and properly briefed about the factors that led to developments in the global fuel and food markets.[29] Despite the absence of a role for oil in either crisis, it is evident that the international public opinion is linking the global inflation wave and the irrational increase in crude oil prices. It suffices to point out that oil prices have been rising on a daily basis, even on hourly basis, and without evident causes while the price of crude oil hovers around $115.[4] Despite 10 years of increasing oil prices, (during which time oil prices have increased 10 fold) and 3 years of stagnant global oil production(1), there is very little public discussion about the security of supply of oil. Both the IEA(2) and Shell(3) have warned of a supply crunch occurring within 5-8 years.[30]
At previous IEF meetings, as in Amsterdam in 2004, when oil prices were only around two years into the current bull run, Opec voiced concern about the damage expensive oil could do.[18] Long as OPEC's output is not sufficient enough to cover the rising demand from Asian region, oil prices will tend to rise, analysts said.[14] India and Mexico. OPEC ministers say oil price may soon even go higher, and that the price is beyond their control as there is enough oil on the market.[15]
The fact that demand is still moving up in China, India, and much of the developing world has nothing to do with it. Part of the perverse hope among those concerned with oil prices has been that an economic slowdown in the West would drop demand enough to undermine crude prices.[31] Oil prices have more than quadrupled since 2002 as supply struggles to keep up with the booming demand.[15]
In Asian trading yesterday, oil prices held steady near record highs, buoyed by a decline in U.S. energy reserves and a weakening dollar that attracted investors to commodities.[28] Record oil prices are accelerating inflation and help is needed from producers to lower the cost of oil, a Japanese Trade Ministry official said before a scheduled meeting with al-Naimi.[2] "We would like to discuss the oil price, it is very high,'' Shin Hosaka, director of the oil and gas division at Japan's Ministry of Economy, Trade and Industry, said in an interview today in Rome.[2] Japan proposes to Saudi Arabia "to be co-operative on a stable price,'' Shin Hosaka, director of the oil and gas division at Japan's Ministry of Economy, Trade and Industry, said in an interview yesterday in Rome.[9]
"Today, there is no need to get worked up and say, 'We must put more oil on the market', because the demands of oil consumers are probably motivated by political reasons," said Saudi Oil Minister Ali-al Naimi. "We have raised output over last year and the prices have continued to climb," he told the Petroleum Argus, an oil industry weekly. [5] The warming weather in the northern hemisphere and the well-supplied oil market, among other factors, are proof that there is no need for an output increase, OPEC has repeatedly said.[13] "OPEC will not hesitate to increase oil production if there's a shortage of oil, but there's no shortage of oil in the market,'' the secretary-general said in Rome.[2] Whenever the ministers to OPEC are asked if there is any chance they will raise oil production, the answer is "no."[31]
Paolo Scaroni, chief executive of Eni SpA, Italy's biggest oil company, also said OPEC should raise production to combat speculation and increases in other commodity prices that are pushing the cost of oil higher.[2] The OPEC chief said OPEC "will not hesitate" to increase production if the group thought the higher prices were due to shortages. He said more oil will not solve the high prices.[32]
We think the start of the corporate results season - with Eni of Italy starting up next week - may focus a few minds. We think they are likely to post a drop in production, we think the OPEC ministers will carry on their "that's all folks" line and we expect to see prices hold over $115 and maybe start to begin a climb towards $120.[17] If the news flow next week is slow, or less worrying at least you could see WTI test $111. If the news out of the Middle East continues to be dogged by OPEC unable to add any more production then there is no reason why WTI should not continue its march upwards.[17]
The average cost of production of crude palm oil is about Ringgit Malaysia 800 a tonne (about $220), while the market rate is about RM 3,200-3,400 a tonne (over $900), four times higher. There is perhaps no other business in this world today that is as profitable as running an oil palm plantation and producing palm oil.[29] Russia'''s recent fall in crude oil output is not a concern to the IEA, which believes previous levels will bounce back with new projects. The IEA'''s forecast for 2008 oil production growth is 0.8%, which is more pessimistic than those of Russia'''s energy and economy ministries, which have said they expect growth of 1.7%.[27]
The producer group has 2 million barrels a day of spare production capacity, mostly in Saudi Arabia, Khelil said. Other members with spare supply are Algeria, Libya, Venezuela and Nigeria, said Khelil, who is also Algeria's oil minister.[2] OPEC expects an additional daily average output growth of 1.2 million barrels or a daily average oil output of 87 million barrels in 2008. The OPEC output quota this year will be less than 32 million bpd and non-OPEC output would be about 50.3 million bpd, the report added.[13] Kuwaiti state news agency KUNA reported Khelil saying Opec had the ability to raise output by 2 million barrels per day.[20] Firstly as Russian output is generally flat, at around 9 million barrels per day, the announcement that the state thinks output may actually fall set a few pulses racing. Some people we have spoken to are also constantly worried by the way Russia reports its reserves, basically shoddily. Companies like BP have been milking cheap but productive fields in Russia as they seek to boost returns. That day is drawing to a close and investment is needed and fast.[17]
The trouble with hydrocarbons is that we cannot simply phone up the wholesaler and replace them, hopefully for a cheaper price. They would like to do this in the U.S. at the moment because - although stocks are not dangerously low - they are depleting at around 800,000 barrels per day at the moment in a time of year when they are supposed to be building. Another irritant to the price. [17] There are no visible signs of any demand compression in the U.S., either. Those who forecast a sharp downward correction in crude prices resulting from recessionary conditions in the U.S. are hiding their face. Crude oil stocks in the U.S. are close to their seasonal average, and the fall has been larger than expected.[29] A quick look at the price of gasoline in the U.S., now nearing $4 a gallon, gives lie to that. Americans are not driving a great deal more, but they cannot walk to work, school, and retailers. Oil dropped to close to $50 in early 2007, so its price is up 120% since then. It is up 65% since late last summer, and 45% since last fall. The awful thing about these price increases is that it is hard to point to any reason for demand to pull back.[31] "If we add more oil to the market, I am sure it will not solve the problem.'' Oil consumption in some parts of the world, including the U.S., may be affected by high prices, though Asian demand won't be, he said.[2]
"Oil prices, there is a common understanding that has nothing to do with supply and demand," al-Badri said on the sidelines of an energy conference in Rome.[12] "If we add more oil to the market I am sure it will not solve the problem,'' OPEC Secretary General El-Badri said in Rome. Investors have transferred money into commodities, especially energy, during the past year because their returns have outpaced stocks and bonds.[9] "From a real supply point of view, OPEC doesn't feel any necessity to produce more crude oil,'' said Hirofumi Kawachi, a senior energy analyst at Mizuho Investors Securities Co. in Tokyo.[9]
According to OPEC's latest monthly report, demands from the Organization for Economic Cooperation and Development (OECD) countries will slightly decline, while demands from non-OECD nations, including some in Asia, the Middle East and Latin America, will stay strong, leading to a growth of global demand for crude oil.[13] The basket comprises 13 different crudes from all countries in the organisation, which produces about 40 percent of global oil supplies.[28]
Addressing the latest meeting of Development Committee of World Bank and IMF in Washington on April 13, the Finance Minister, Mr P. Chidambaram, lamented that high crude oil and galloping food prices were imposing a crushing burden on developing countries.[29] Ali al-Naimi of Saudi Arabia, Opec's leading oil minister, said: "I'm not going to dump crude on the market.[18] OPEC officials including Saudi Arabian Oil Minister Ali al- Naimi have rebuffed previous requests from U.S. and European politicians for more oil, saying supply is sufficient.[2] Oil ministers from the 12 OPEC member states are due to be joined by chief executives of major producers when about 500 delegates gather in Rome for the three-day biannual conference.[16]
Iran's Oil Minister, Gholam-Hossein Nozari, will attend two energy conferences in Rome to exchange ideas on energy issues.[26]
April 19 (Reuters) - The International Energy Forum (IEF), taking place in Rome from April 20-22, will bring together around 60 energy ministers from producer and consumer countries.[22] Fulvio Conti, head of Italian energy giant, Enel, and Christophe de Margerie, chief executive of French firm Total, will join energy ministers from Kuwait, Qatar, Russia and Norway at the International Energy Forum to be held in Rome.[23]
The global economy 'has not reached the tipping point where it can't accept higher prices', said Shokri Ghanem ahead of the International Energy Forum, which will begin in Rome on Sunday.[16] In addition to attending the IEBF sessions, Nozari is to participate in the International Energy Forum (IEF), taking place in Rome from April 20-22.[25]
The IEBF provides a platform for discussion between energy ministers and heads of international oil companies. [25] The Australia 2020 Summit seems to be dominating the media today, and energy scarcity has managed to get at least one mention, with international relations expert Alan Dupont identifying climate change, pandemic disease, food, water and energy scarcity and proliferation of weapons of mass destruction as the key issues. One summit submission that mentions peak oil is this piece from Rod Campbell-Ross.[30]
All it takes is one media report that points at the impact of high oil prices on the transportation cost of food products to link the rising prices of food products to oil in the public mind despite the huge gap between the two events.[4] Oil prices have surged higher since 2007 and regularly hit new peaks, so that price breaking is no longer news but a 'routine' matter.[13] Oil prices are facing the same dynamics of which have ruled the market for two years.[31]
In theory, costly oil should help to bring on new production, which could eventually soften prices.[18] Of particular concern is the fact that 3 of the 4 most important exporting countries from which Australia procures its oil are experiencing declining production (Vietnam, Papua New Guinea and Malaysia). The amount of oil available for export from these countries is suffering rapid reduction through increasing domestic consumption coupled with declining oil production(4) In addition, oil available for export generally is declining.[30] Attacking the bio-fuels policy of industrialised countries is hardly the solution to containing prices in our country. Countries such as the U.S., Canada and the European Union produce their own wheat, corn and oilseeds. What they do with their indigenous production is their concern. Whether they eat it or burn it or throw it in the sea or give it as aid or export to the world market is their decision.[29]
The president of the cartel, Chakib Khelil, said "Any increase in production now will not have an impact on prices because there is a balance between supply and demand,' according to Bloomberg.[31] Khelil said, however, that if production is increased now, prices will not be affected because there is balance between supply and demand currently. Output was raised in 2007 and prices remained unchanged, he said. The Algerian official said there are many projects and investment opportunities in his country and welcomed Kuwaiti investments in that area.[3]
A host of supply and demand concerns in the U.S. and abroad, along with the dollar's weakness, have served to support prices, even as record retail gasoline prices in the U.S. appear to be dampening demand.[12]
OPEC's daily basket price, which is always published with a 24-hour delay and serves as the reference price for the Organisation of Petroleum Exporting Countries, rose to 106.65 dollars on Wednesday from 105.73 dollars the previous day, the cartel said in a statement.[28] Attention has also focused on comments from the Organization of the Petroleum Exporting Countries (OPEC), which have emerged from the IEF gatherings.[22]
The over looked factor is the contribution of OPEC countries to the present oil crisis. [14] "What's happening in the oil market is due to the mismanagement of the U.S. economy, which is probably affecting the rest of the world," said Opec president Chakib Khelil at the group's last formal meeting in March.[18] Chakib Khelil OPEC President has confirmed that the cartel is unlikely to raise production.[15] At the same time OPEC is holding the line on production, suppliers of crude like Russia and the U.S. and not pumping more.[31] Officials at Shell, which is currently pumping 400,000 barrels per day below capacity in the OPEC nation due to sabotage and security concerns, confirmed a small amount of production had been shut in.[19] OPECs production levels were just one of many factors, he said. "But how much higher it will go, of course it depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries.[32] OPEC's actual production will be higher than the quota but that will not be sufficient to coverup the demand-supply imbalance in the international market.[14]
No matter how great the farce, the power of reason cannot change the cartel's attitude. It has occurred to OPEC members that their best play is to do nothing. With crude now above $116 the tens of billion of dollars in extra profits coming to them can be explained away as being caused by speculation and a weak dollar.[31] The Doha meeting was also the occasion for details to emerge on various deals. In defiance of U.S. pressure to avoid doing deals with Iran, the OPEC member, together with Pakistan and India said they were working on a project to pump Iranian gas through Pakistan to India.[22]
"Some here have said that if demand becomes stronger, OPEC could increase supply,'' Scaroni told reporters in Rome today. "I hope this happens.[2] OPEC's latest monthly report shows that demand from non-OECD (Organisation of Economic Co-operation and Development) nations including Asia, Middle East and Latin America are strong, however, demand from OECD countries tend to decline.[14]
Opec wanted an "appropriate" price, which would suit both consumers and producers, Khelil said, but did not reveal the price level.[20] Khelil also said a previous output increase had failed to push prices down last year.[10] The increase in food prices was accompanied by basic and significant changes in the production and ways of consumption of agricultural crops, not to mention the actual shortage in the supplies of a number of important crops.[4] Oil and food are inextricably linked through production and distribution. Policies and pro grammes are urgently needed to address this.[30]
The chairman of Libya's National Oil Corp. says the world economy can cope with rising crude prices, which may top $120 next week. [16] Despite the subsidy-led backing of ethanol the country is still gulping down the hydrocarbons. This is likely to be exacerbated in the short term by the restart of an alkylation unit at BP's Texas City refinery. This will allow the U.S. to pull in even more crude oil, tickling prices even higher.[17]
Indian soy oil futures opened lower tracking weakness in the edible oil futures in other Asian markets and on expectations of stringent government measures to control prices.[19] "We're seeing more money coming into the oil market and it raises demand for futures contracts, not the real thing.''[9] The conference programme says growing energy demand in the future will test the "ingenuity" of the sector.[23]
June Brent crude futures on the ICE futures Exchange dropped 6 cents $113.86 per barrel.[19] On April 18, futures climbed $1.83, or 1.6 percent, to $116.69 a barrel, a record close.[9]
As we write, the price of WTI is jumping over $116 per barrel, another record.[17] Crude prices hit a new record high of $117 on Friday after Nigerian rebels attacked a Royal Dutch Shell-operated pipeline.[16] U.S. light crude for May delivery rose 5 cents to $116.74 a barrel by 2310 GMT, after briefly touching a new record high of $117.05 a barrel.[10]
Light sweet crude for May delivery on the Nymex was trading 10 cents down at $116.59 per barrel in the Globex electronic trade.[19]
"Who would have thought oil would be just around the corner from $120 a barrel and we could be there by the end of the month,'' said Peter McGuire, managing director at Commodity Warrants Australia Ltd. in Sydney, in an interview with Bloomberg Television. "It just defies gravity and the dollars are just floating into that.''[9] "For years we've been saying the era of cheap oil is over. None of us thought it would reach $115 a barrel so quickly, so it could reach $120 soon," Bloomberg quoted him as saying.[16] "For years we've been saying the era of cheap oil is over,'' Libya's Ghanem said. "None of us thought it would reach $115 a barrel so quickly, so it could reach $120'' this week, he said.[2]
As a wealthy country, Australia can no doubt out bid other countries for oil for a number of years. [30]
U.K. Prime Minister Gordon Brown last week urged producing nations to provide more oil to "respond'' to higher prices, to make sure markets are "adequately supplied.''[2] India's entry into the world market to buy millions of tonnes of wheat, pulses and edible oil pushes prices higher.[29] According to the minister it was a cruel joke on the world's poor. This kind of emotional outburst may be politically expedient, but nothing more than that. Today's high prices of food around the world are the result of continued failure of large, populous economies such as India and China to reach food self-sufficiency or even near self-sufficiency.[29] In some sense, India is responsible for current high prices of major foods around the world.[29]
In India, successive governments since 1991 have ignored the real economy that is agriculture and pushed it to the background. The country is now paying a heavy price for this, says G. CHANDRASHEKHAR.[29] India as a country and Indians as a people are paying a heavy price for the omissions and commissions of successive governments that paid lip service to agriculture, but did little real work on the ground.[29]
A smaller than normal build-up in global inventory is anticipated. Importantly, there is strong expectation of a recovery in the U.S. economy towards the latter part of the year, which is sure to boost consumption and, in turn, prices. [29] The forum does not take decisions or negotiate legally-binding settlements and critics have dismissed the body, which formally meets every two years, as a talking shop. The IEF describes itself as "the largest recurring global gathering of energy ministers" and says its particular approach aids development of contacts and understanding of the key issues.[22]
The impact of sharply higher oil prices; and possibly outright shortages, are likely to severely impact the Australian economy. It is my view that there is a high probability that Australia, along with the rest of the world, will be suffering a major, multi-faceted energy crisis well before 2020. Therefore this issue needs sophisticated analysis and an equally sophisticated risk management response. [30] There is thus an implicit assumption by government that there will be sufficient crude oil for our needs through 2020. This assumption is not supported by the available evidence; in fact there is a growing body of evidence that indicates a rapid appraisal of the situation is urgently required.[30] P ARIS ( ResourceInvestor.com ) -- A number of factors have been underpinning the new highs set by the crude oil market this week.[17] Ironically, India recently decided to permit crude palm oil import at zero per cent duty.[29] The demand side is robust. Admittedly, there is a slowdown among economies in the OECD, which may pare the growth in demand, but this is being largely neutralised by growth in major Asian economies such as China and India, both of which continue voraciously to guzzle mineral oils.[29]
The IEF began as an informal gathering of ministers in response to the 1990-1991 Gulf War when oil spiked briefly to $40 before sinking back below $20. It came of age with the inauguration in November 2003 of the IEF's permanent secretariat in the Saudi capital Riyadh.[22] In addition to sharing his thoughts on crude prices, the Finance Minister criticised the policy of some countries that support bio-fuels.[29] Oil-consuming countries should step up pressure on producers to increase output, U.K. Prime Minister Gordon Brown said April 15.[9]
Pressure from consumers to raise output is "probably politically driven,'' oil newsletter Argus reported yesterday, citing al-Naimi. [2] Oil gained 22 percent, while the S&P; 500 slid 5.6 percent and government bonds returned 12 percent, according to Merrill Lynch & Co. indexes.[9] Italy's outgoing minister of economic development, Pier Luigi Bersani, said the Rome forum would create an important opportunity for dialogue between government and industry leaders.[23]
No wonder, prices have set new highs at the front end of the curve; and far forward values too are high still. Those who seriously track commodity markets realise that the market looks not only at current demand-supply fundamentals, but also more importantly changes in the fundamentals in future. [29] An environment of rising prices without significant alteration in supply and demand fuels more rising prices.[31] A member of the Japanese delegation visitng the country Mr Haruo Shimadasaid in New Delhi that the gap between demand and supply of food grains could be reversed by using Japanese technolog.[11]
The supply side is beset with problems. OPEC is rather cautious in its output policy.[29] Russian output has been at the centre of problems the market has been pricing in. There are a number of basic difficulties surrounding production from Russia, one of which is the poor state of investment in its fields.[17] Last year, production rose by 2.3% to 491.481mn tonnes, or 9.87mn bpd, a notch up from 2.2% in 2006, but much lowers than huge spikes in previous years, including a record 11% in 2003.[27]
Prices advanced 6 percent last week, the biggest weekly gain since February 2007, and are up 77 percent from a year ago.[9] Ethanol exports thrive in Brazil, as critics say biofuels raise food prices and contribute to world hunger.[32]
SOURCES
1. OPEC could increase output if needed: Kuwait | Reuters
2. Bloomberg.com: Worldwide
3. MENAFN - Middle East North Africa . Financial Network News: OPEC can boost output by 2m bpd -- Chairman
4. Dar Al Hayat
5. AFP: Oil producers refuse to raise output
6. Channelnewsasia.com
7. OPEC Secretary General says oil price could rise | Business News | Reuters
8. RTTNews - Market Sensitive Global News, Broker Ratings, News&Analysis;, Global Markets News.
9. Bloomberg.com: India & Pakistan
10. Oil holds just below record $117 a barrel | Reuters
11. :: News on AIR ::
12. The Associated Press: OPEC chief: Oil prices would go higher regardless of supply
13. The Manila Times Internet Edition | OPINION > Weak dollar not sole reason for high oil prices
14. How far is OPEC responsible for Oil rally?
15. OPEC Ministers Gather In Rome To Address High Oil Prices
16. Press TV - 'High oil price no threat to economies'
17. Resource Investor - Energy - Oil Market Weekly Wrap: To Infinity and Beyond
18. Opec to reject calls to help ease oil prices - Scotsman.com Business
19. Commodity Online : Oil prices little changed
20. Gulfnews: Opec president says no need to raise oil production
21. Investing | Africa - Reuters.com
22. FACTBOX-What is the International Energy Forum? - Forbes.com
23. AKI - Adnkronos international Italy: Global energy demand tops agenda at Rome forum
24. No OPEC meeting at the IEF: OPEC sec-gen- International Business-News-The Economic Times
25. tehran times : Oil minister in Rome to attend IEBF, IEF meetings
26. Press TV - Iran takes part in energy confabs
27. tehran times : IAE welcomes OPEC model gas cartel
28. Macau Daily Times - OPEC oil tops record high of 106.65 dollars a barrel
29. The Hindu Business Line : Paying the price for ignoring the real economy
30. The Oil Drum: Australia/New Zealand | The Australia 2020 Summit
31. 24/7 Wall St.: As OPEC Holds Production, Oil Moves Toward $150
32. OPEC chief al-Badri says oil prices could go higher - International Herald Tribune
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