07-05-04
OPEC is not to blame for soaring oil prices which have hit 13-year highs as members pump up to maximum capacity, but the producers' cartel must do more to calm a nervous market, Gulf analysts say.
Unexpectedly strong economic growth in some industrialized nations as well as
China and India, has driven demand for the crude to higher levels, pushing
prices to around $ 40 a barrel in New York, the highest since 1990.
Fear of terrorist attacks on oil installations in the Middle East, especially in Saudi Arabia, prospects of shortages in gasoline in the United States and a drop in world inventories have all contributed to the hike.
"The situation is highly explosive worldwide now, because of lingering fear
that oil installations could be targeted by fresh attacks, endangering
production," said Kamel al-Harami, a former Kuwaiti oil official.
"Normally, at this time of year, demand drops by at least 2 mm bpd for
seasonal reasons, but the actual demand has in fact increased because of strong
world economic growth," Harami told.
Gunmen attacked a Saudi oil facility at the industrial port of Yanbu on the Red Sea, killing five staff at European engineering group ABB and a member of the Saudi National Guard. The four attackers also died.
In London, benchmark Brent North Sea crude oil for June delivery rose 26 cents
to $ 36.98 a barrel in early trading, levels last seen in October 1990 in the
wake of Iraq's invasion of Kuwait.
New York's reference light sweet crude June contract gained 33 cents to $
39.90 in pre-opening electronic deals, having also closed at the highest level
for more than 13 years a day earlier. The New York contract was seen likely to
top $ 40 a barrel within days.
"It is clear that the market is reacting to a demand-driven problem. OPEC
is currently far exceeding production ceilings and most members are producing to
almost maximum capacity," Abdulwahab Abu-Dahesh, senior economist at Riyad
Bank, said. "The problem is not caused by OPEC. They are producing 2.5 mm
bpd above their output quota of 23.5 mm bpd. The problem is that demand for oil
spiked at a time when stocks were lower than average," he told.
OPEC agreed in March to cut output by 1 mm bpd to reduce total production to
23.5 mm from April 1. But OPEC president, Indonesian Oil Minister Purnomo
Yusgiantoro, insisted the cartel was fighting high prices by exceeding its
agreed production ceiling by 1.5 mm bpd.
Saudi economist Bishr Bakheet, head of Bakheet Financial Advisors, believes that
"real" oil prices are not high if inflation rates and the price index
of other commodities were taken into account.
"Consumers cry about high prices appears to be totally political. Real oil
prices are not high if factors of inflation and high increases of prices of
internationally-traded commodities were considered," Bakheet said.
OPEC kingpin Saudi Arabia is perhaps the only country that has spare capacity and is currently producing some 8.6 mm bpd, about 1 mm barrels above its quota. Kuwait, with an OPEC quota of 1.886 mm bpd, is reported to be producing at 2.35 mm bpd, believed to be its current maximum output capacity.
Gulf Arab states, which include OPEC members Saudi Arabia, Kuwait, the United
Arab Emirates and Qatar, in addition to non-OPEC Oman are estimated to be
producing 15 mm bpd. Global demand for oil is estimated at 80-81 mm bpd compared
to forecasts at around 79 mm barrels, Abu-Dahesh said.
The Centre for Global Energy Studies (CGES) has raised its forecast for
demand growth this year from 0.9 % to 2.3 %, and International Energy Agency (IEA)
upgraded to 2.2 % from 1.4 %. But OPEC can certainly play a psychological role
to ease market pressures, Harami said.
"They need to assure the world that they are maximising output until
markets stabilise. This will calm the market down," Harami said.
Source: Agence France Presse