Hints of a rift at OPEC about production
By Jad Mouawad
Published: May 9, 2008
A member of OPEC signaled for the first time in months that the oil
cartel might increase its output if prices keep rising, even as oil
hit another record on Friday.
The comments from Libya's senior oil official, Shukri Ghanem,
suggested a possible rift among OPEC members. Since the cartel's last
meeting in March, the Organization of Petroleum Exporting Countries
has argued that the market was not lacking in oil supplies and blamed
speculators for driving up prices.
In recent weeks, prices have come under renewed pressure because of a
string of export disruptions from Nigeria. Crude oil for June delivery
rose $2.32, or 1.9 percent, to $126.01 a barrel in New York trading on
Friday. Prices have been above $100 since early February.
Since they last increased oil supplies in September, members of the
Organization of the Petroleum Exporting Countries have abdicated most
of their responsibilities toward the market, arguing that the higher
prices had more to do with investment flows than with supply and
demand.
The problem for OPEC is that prices have become largely unhinged from
real market factors. As the dollar declines and the economy slows,
investment funds have moved into commodities like oil or gold, which
they consider safer and more profitable than stocks.
But the political cost of rising energy prices, especially in the
United States, which is in the midst of a presidential election, is
making OPEC's position increasingly delicate. Economic growth in the
United States has slowed and gasoline demand is set to fall this year
for the first time since 1991.
At a meeting of oil producers and suppliers in Rome last month, many
OPEC delegates, including the Saudi Arabian oil minister, Ali Al-
Naimi, said there were not enough buyers to justify an increase in
production.
But some producers are becoming increasingly uneasy about the run-away
prices and are finding it difficult to maintain OPEC's position.
"They are playing with fire," an analyst at Lehman Brothers, Adam
Robinson, said. "Every time the price goes up, and we break a new
psychological mark, they risk killing the goose that lays the golden
egg. Their biggest fear is triggering something they can't control."
The group, which accounts for 40 percent of the world's oil exports,
is not scheduled to meet until September. At its March gathering, OPEC
ignored calls from President George W. Bush and other industrialized
leaders to bolster production, opting instead to keep output steady.
"We would consider among other options the possibility of increasing
output as a way to ensure market stability," Ghanem, the Libyan
official, was quoted by Bloomberg News as saying Friday. "I expect a
meeting before September. I am not calling for one, but I would
support one."
Another OPEC delegate, quoted by Reuters on Friday, also raised the
prospect of an OPEC consultation to increase production before the
September meeting.
But there is no suggestion that the cartel will meet soon. On
Thursday, the organization's secretary-general, Abdalla Salem El-
Badri, issued a statement from the group's headquarters in Vienna,
saying there was "clearly no shortage" of oil in the market.
"In recent month, oil prices have become increasingly volatile, mainly
driven by financial market developments and the increased flow of
speculative funds into oil futures," the statement said.
But he seemed to leave the door for OPEC. "The organization stands
ready to act if the market shows a need for any further measures," he
said.
|
