OPEC, the producer of more than 40 percent of the world's oil, is supplying the international market with enough crude and can't be blamed for record prices, the group's new president, Chakib Khelil, said.
There is enough oil in the market, Khelil, the Algerian oil minister who took over OPEC's rotating presidency for 2008, told reporters today in Algiers. It's the problems in Nigeria, in Pakistan and the credit crisis caused by the U.S. subprime- mortgage market collapse that caused prices to increase.
He declined to say whether the 13-member Organization of Petroleum Exporting Countries may decide to raise output to curb prices, when it meets on Feb. 1 to discuss production targets at its headquarters in Vienna. If we see that the U.S. economy has moved into a recession, we won't need to increase production because that will reduce demand for oil, he said.
OPEC seems happy with prices as they are, said John Hall, managing director of U.K-based John Hall Associates energy consultants. Otherwise, it would be thinking of increasing output to help the global economy and to meet rising demand from China and India.
Oil prices in New York rose to a record $100.09 on Jan. 3, as violence flared in Nigeria, Africa's largest producer, cold weather in the northern hemisphere boosted demand for fuels and investors bought commodities to hedge against inflation. Prices closed yesterday at $97.91 a barrel.
High Prices
Government reports that U.S. job growth missed forecasts and that unemployment had jumped to a two-year high of 5 percent are fueling concern that the economy is headed to a recession.
Oil prices will remain high through the first quarter of the year and they may drop in the second quarter, as winter comes to an end, said Khelil. Some non-OPEC countries can produce more crude, he said, without naming any.
OPEC members Iran, Libya and Qatar two days ago said OPEC cannot curb oil prices and that speculation and fears of supply disruption from the Middle East and Africa are fueling oil gains. Indonesia, OPEC's second-smallest producer after Ecuador, is so far the only member to publicly support increasing output.
OPEC, led by the world's top oil exporter Saudi Arabia, left production targets unchanged at its Dec. 5 meeting, ignoring U.S. and European Union calls to pump more oil.
OPEC's production ceiling now stands at 29.673 million barrels a day for 12 of its members. War-torn Iraq, which doesn't have a quota, produces about 2.3 million barrels a day.
Inadequate Capacity
Separately, Christophe de Margerie, the chief executive officer of Total SA, Europe's third-largest oil company, said he expects high prices for a long time.
There's not enough production capacity to meet demand, de Margerie said in an interview today on Europe 1, a Paris- based radio station. With strong demand like today and the inability to raise production, I don't see how prices could fall strongly and quickly.
He said the French company will strongly increase its investment budget this year from the $16 billion in 2007, adding that it will probably be raised in 2009 and 2010 as well. He warned, however, that investment decisions taken now will have an impact on capacity in five years.
A Bloomberg survey of analysts published yesterday showed crude oil may rise because of declining U.S. inventories and a weakening dollar.
Fourteen of 27 analysts surveyed, or 52 percent, said oil prices will rise through Jan. 11. Eleven of the respondents, or 41 percent, said prices will fall, and two predicted little change. Last week, 53 percent of respondents said oil would drop this week.
U.S. crude-oil inventories fell 25.1 million barrels to 289.6 million barrels in the past seven weeks, according to the Energy Department.
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Saturday, January 5, 2008
OPEC Producing Adequate Oil, President Khelil Says
Sunday, November 18, 2007
French, Canadian Officials Call for China Yuan Shift
France and Canada said China must allow the yuan to appreciate faster after a meeting of policy makers from the Group of 20 nations.
The yuan, where it is, is causing tensions, French Finance Minister Christine Lagarde said in an interview at the G- 20 meeting in Kleinmond, near Cape Town, today. Canadian Finance Minister Jim Flaherty told reporters yesterday that China and a number of other Asian countries need to do more.
G-7 officials have strengthened their rhetoric on China in the past month as concern mounts it isn't shouldering enough of the dollar's slide, garnering an unfair advantage for its exporters. The European and Canadian currencies have soared to records against the dollar, threatening to hurt economic growth. By comparison, China has allowed the yuan to rise about 5 percent against the dollar this year and it has fallen against the euro.
While Lagarde said the G-20 didn't point out any specific currencies and wants to operate by consensus, she added that erratic movements of currencies are not welcome.
The French and Canadian officials are meeting counterparts such as U.S. Treasury Secretary Henry Paulson, European Central Bank President Jean-Claude Trichet and Chinese central bank governor Zhou Xiaochuan at this weekend's meeting in South Africa.
There was a genuine concern on the part of a lot of countries on the turbulence in the currency markets, Canada's central bank governor David Dodge said yesterday.
Correct Direction
International Monetary Fund Managing Director Dominique Strauss-Kahn echoed some of the concerns expressed by Canadian and French officials. He told reporters today the euro, the Canadian dollar and Brazil's real have on their shoulders a much larger part of the adjustment than they should, even though the U.S. currency has moved in the correct direction.
Paulson has signaled to U.S. trading partners that the dollar will rebound, predicting it will reflect long-term strength in the American economy.
The U.S. currency has dropped about 11 percent so far this year, based on the Federal Reserve's U.S. Trade-Weighted Major Currency Index. It fell this month to its weakest against the euro since the European currency's debut in 1999, to a 26-year low versus the pound and the lowest against Canada's dollar since it was floated in 1950.
OPEC countries meeting this weekend in Riyadh, Saudi Arabia, have been debating the dollar's decline, which is making it harder for them to manage inflation and keep their pegs to the currency at the same time. Gulf states including Saudi Arabia and the United Arab Emirates may revalue their currencies in as soon as a month's time, a person familiar with Saudi monetary policy said yesterday.
Sunday, November 4, 2007
What is the reason for high Oil prices?
High crude oil prices could be due to a shortage of oil supplies. High prices for oil products - as purchased by end consumers such as motorists - are more likely to reflect other factors, such as taxation.
Crude oil prices react to the balance of demand and supply in the short term, and the rate of investment in the longer term. If investment is not made far enough in advance, oil supplies could be limited in the longer term, thus raising prices.
Sentiment is also an important factor: if traders in the oil market believe there will be a shortage of oil supplies, they may raise prices before a shortage actually occurs.
Other factors influencing the price of crude oil include accidents, bad weather, increasing demand, halting transport of oil from producers, labour disputes (strikes) as well as other disruptions to production including war and natural disasters.
Crude oil now represents less than a quarter of the price of oil products in many countries. Therefore, taxes have more influence over the price of oil products.
When oil taxes are raised, end consumers often mistakenly blame the oil producers, but it is really their own governments that are responsible.
OPEC seeks a stable oil market, without sudden price changes or excessively high or low prices.
OPEC regularly meets with other oil producers and with consumers in an effort to improve understanding and trust in the oil industry and to seek policies and measures that do not create unnecessary economic hardship for oil producers or consumers.
Thursday, November 1, 2007
Oil hovers near new record around $96
The price of oil rose to a new record above $96 a barrel Thursday after a surprise drop in U.S. crude stockpiles raised concerns about supplies for coming winter demand. Other energy futures also gained.
It was the second week in a row the U.S. Energy Information Administration reported a sharp and unexpected drop in oil inventories.
The decline in U.S. crude oil inventories has been a key driver of oil prices, said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for December delivery rose as high as $96.24 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore before dropping back to $95.59 a barrel.
Crude prices have reached inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
Friday, October 26, 2007
Supply fears push oil above $92
Oil prices have risen to yet another record after an unexpected fall in US crude stockpiles added to fears over supplies for the winter months ahead.
US light, sweet crude rose $1.74 to $92.22 a barrel before falling back to $91.86 by close of trade in New York.
Meanwhile London Brent also reached a high of $89.27 before later settling at $88.69, up $1.21 cents on the day.
Analysts said threats of US sanctions against Iran and tension on the Iraqi border had also helped the rally.
According to some analysts, oil may well reach $100 a barrel.
US crude oil stocks unexpectedly fell by 5.3 million barrels last week.
Earlier in the week, prices had retreated from previous highs following concerns about the health of the US economy and expectations of more output from oil producers' cartel Opec.
Despite the latest price surge, Opec members said they would stick to their existing production targets.
The group has already pledged to increase production by 500,000 barrels a day starting from 1 November, but the US is calling for an additional rise.
Monday, October 15, 2007
Oil Trades Above $86 After Rising on Turkey-Iraq Border Tension
Crude oil traded above $86 a barrel after rising to a record yesterday on concern oil shipments may be disrupted if Turkish forces pursue Kurdish militants in Iraq.
Prices climbed as much as 3 percent yesterday after Turkish Prime Minister Recep Tayyip Erdogan formally asked lawmakers to sanction military action against rebels based in Iraq, holder of the world's third-largest oil reserves. Oil also gained as the dollar fell to a two-week low against the euro and U.S. equities declined the most in two months.
``This is something that Turkey has probably wanted to do for a long time,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``You have the weak dollar, and concerns about the U.S. economy, and that is just spilling into the buying of commodities.''
Crude oil for November delivery was at $86.35 a barrel, up 22 cents, in after-hours electronic trading on the New York Mercantile Exchange at 9:30 a.m. in Sydney.
The contract settled $2.44, or 2.9 percent higher, at $86.13 yesterday. It reached $86.71, the highest since being introduced in 1983.
Today's intraday high passed the previous all-time inflation- adjusted record reached in 1981 when Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.
Crude-oil and other commodities also rose because the U.S. dollar declined against the euro, enhancing their appeal as an investment. The Standard & Poor's 500 Index fell 0.8 percent to 1,548.71 yesterday after Citigroup Inc., the largest U.S. bank, said loan defaults will plague the financial industry for the rest of the year.
Currency Impact
``You don't hear a lot of complaining about high prices except in the U.S.,'' Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washington said yesterday. ``The rise in prices is a lot less impressive in other currencies.''
In U.S. dollars, West Texas Intermediate, the New York-traded crude-oil benchmark, is up 41 percent so far this year. Oil is up 31 percent in euros, 35 percent in British pounds and 39 percent in yen.
Oil ``is going to soon hit $90 and go north of $100 next year,'' said Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, with $700 million in customer accounts. ``We should see $150 to $200 oil in the next two to three years because of the drop in the dollar. Once Asian countries allow their currencies to appreciate, demand will explode there.''
Brent crude oil for November settlement rose $2.20, or 2.7 percent, to close at a record $82.75 a barrel on the London-based ICE Futures Europe exchange yesterday.
OPEC members have said a falling dollar justified higher prices because oil-producing countries sell oil in dollars and often buy goods in euros. OPEC will discuss the impact of the falling dollar when members meet on Dec. 5, Algerian Oil Minister Chakib Khelil said yesterday.
Monday, October 1, 2007
Indian crude oil basket hits $78.46 a barrel
The basket of crude oil that Indian refiners buy hit another all-time high of $78.46 a barrel on Friday, the latest day for which data is available.
The high prices have pushed up revenue losses of the country’s three oil marketing companies to Rs 210 crore per day from Rs 190 crore a day in the first 15 days of September.
The government is, however, still sticking to its guns by not increasing retail selling prices of petrol and diesel. There is very less chance of a hike in prices of petrol and diesel. The government is under huge political pressure, and could face mid-term elections, said a senior official of the petroleum ministry. Fuel prices are more about politics than economics, the official added.
The official, however, said the Cabinet was closely observing the movement of the price of the Indian crude oil basket. We are keeping the Cabinet updated all the time, the official said.
The Indian basket, which comprises Oman-Dubai sour (high sulphur) grade crude oil and Brent dated sweet (low sulphur) crude oil in a 59.8:40.2 ratio, averaged $74.83 a barrel in September. In August the average price of the basket was $69.03 a barrel.
The prices of petrol and diesel were last increased in June 2006 when the average price of the crude oil basket was at $67 a barrel. The rupee was then valued at around 45 per dollar.
Since then, the value of rupee has risen to below 40 per dollar. This effectively makes the value of the crude oil basket around $72 a barrel, as the oil marketing companies are now paying lesser in terms of rupee for the crude oil they buy.
