Market fundamentals, not speculation, are driving current high oil
prices, US Energy Information Administrator Guy Caruso said Monday.

Caruso told reporters in a briefing at Department of Energy headquarters
that the US is in a different petroleum era, marked by strong and increasing
prices.

Market psychology has "clearly played some role" in lifting prices, he
said, adding however, that "market speculation is a symptom" not the cause of
a tight, high-priced market.

"Most of the risk is on the upside," so that is the direction on which
financial players are betting, evident by "strong long positions," Caruso
said.

In addition to low world petroleum inventories and OPEC output decisions
that have tightened the world oil market, a number of "above-ground risks" are
keeping prices strong, he said, including geopolitics.

Caruso said the supply "picture looks a bit better going into 2008,"
saying he expects production boosts from Saudi Arabia, Angola and Algeria next
year.

Currently, output by producers that are not members of OPEC are
insufficient to compensate for lower OPEC output, Caruso said. But he sees
that shifting by the third quarter of 2008.

Caruso said EIA would be closely watching inventory levels and production
output in coming months. "The way to turn this around is an improvement in
inventories and OPEC production increases," he said.

--Cathy Landry, cathy_landry@platts.com