Algeria's Khelil sees pressure on oil prices into early 2007

Algeria's Khelil sees pressure on oil prices into early 2007

Algiers (Platts)--23May2006

Algerian oil minister Chakib Khelil said late Monday that oil prices were
likely to remain high for the rest of the year and even into the first quarter
of 2007 because of price pressure caused by tight spare production capacity
which he said should be doubled to 4 million b/d to calm markets.
"Consuming countries and both OPEC and non-OPEC oil producers are
investing in boosting exploration, production and refining capacitym," said
Khelil, speaking in Washington, where he is attending an international
conference.
"We will see in the next few years, more oil offered and maybe the
development of excess capacity which should help to stabilize markets," Khelil
said in a statement to the official Algerian news agency APS.
"Excess capacity of 4 million b/d would help to satisfy any supply
interruption or production problems in one or more producing countries,"
Khelil said. Current spare capacity of around 2 million b/d was not enough to
reassure markets.
OPEC kingpin Saudi Arabia holds the bulk of OPEC's spare capacity. Khelil
said Algeria was adding production capacity to meet higher demand for both oil
and natural gas.
He said that pressure on oil prices, which Tuesday rose above $70/barrel
for US light sweet crude oil futures, "are likely to continue to the end of
the year and even into the first quarter of 2007."
This is due to the "strong correlation" between global economic growth
and demand for crude oil in some countries like the US or China, but also due
to geological factors, Khelil said.
"It is very clear that from now until the end of the year, we will see
strong pressure on demand for oil," Khelil said.
He attributed current price strength to a convergence of factors,
including strong demand in key consuming areas, technical problems in non-OPEC
producer Norway and supply disruption in OPEC member Nigeria, tensions in Iraq
and elsewhere in the Middle East and tight spare capacity.
"There is a strong correlation between economic growth and oil demand.
Market supply is sufficient and stocks are high," said Khelil, echoing remarks
by other OPEC delegates who believe prices are not driven purely by supply and
demand fundamentals.
Other market pressures are due to high energy taxes in Western consuming
nations, tight refining capacity and speculation on futures markets, Khelil
said.
-- Lies Sahar, newsdesk@platts.com

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