PARIS, 6 April 2007 — High oil prices are being caused by geopolitical tensions and not by a lack of supply, OPEC ministers said yesterday.
“This price is not related to demand and supply at all. It is only related to geopolitics,” Qatari Energy Minister Abdullah bin Hamad Al-Attiyah said on the sidelines of an oil industry conference here.
His comments were echoed by OPEC President Mohammed Al-Hamili, who is also oil minister of the United Arab Emirates.
“The high prices of late are due to the geopolitical situation. It has nothing to do with the fundamentals,” he said.
The 12-member Organization of Petroleum Exporting Countries has cut its production twice in the last six months, but Attiyah maintained the market was well supplied.
Prices have risen sharply in the last week to nearly $70 per barrel in London on Monday, mainly as a result of tension over the capture of British sailors by Iran.
Attiyah said he did not expect OPEC to increase its production before the next scheduled meeting in September.
“I don’t think so. There is no need,” he said.
But Claude Mandil, the head of the International Energy Agency (IEA), an energy watchdog for rich countries, said that prices were too high and that world supply was “a bit too low.” “The oil supply is in our view a bit too low because we are in a period when stocks should be built and we are not sure that stocks are being built right now,” he told AFP in an interview.
Mandil repeated that the IEA believed that “it would be better to have a little more oil” from producers in general.
Attiyah declined to comment on speculation that some of the world’s biggest gas producers might announce the creation of “gas OPEC” production cartel at a meeting on April 9 in Doha.
Algeria, Iran, Russia, Qatar and Venezuela are to meet in the Qatari capital on Monday. “No comment. We have to wait to see what the others are thinking,” he said.
Mandil also said that he was “not so concerned” about suggestions that leading gas producers planned to club together to form an OPEC-style organization for gas.
The prospect has raised fears in consuming countries and the issue is expected to figure at a meeting of possible cartel members at the Gas Exporting Countries Forum in Qatar on Monday.
“I don’t see how it could be possible to transpose to the gas market the mechanism that OPEC has achieved in the oil market, so I a.m. not very concerned,” Mandil told AFP.
Meanwhile, in Brasilia, Ecuadoran President Rafael Correa confirmed here Wednesday that his country will return to the Opec, 15 years after quitting the oil organization.
“The decision to return to OPEC has been taken and this will open up a lot of opportunities, among them access to credit in Middle East banks,” Correa said in a news conference during an official visit to Brasilia.
Al-Hamili said last month that Ecuador could return to the group it left in 1992 “at any time.” Ecuador’s bid is backed by Venezuela, the only Latin American member of OPEC. Ecuador produces 530,000 barrels of oil per day — its top export — and is the fifth largest producer in South America. Correa had announced that Ecuador would apply to rejoin OPEC after the leader was elected in November. However, the Andean nation faces a debt to OPEC of $5.3 billion, which it left when it withdrew from the organization.
In London, world oil prices rose yesterday after a massive plunge in US motor fuel reserves, but gains were capped after Iran freed 15 seized British military personnel, analysts said.
In early London trades, the price of Brent North Sea crude for May delivery added 17 cents to $68.57 in electronic trading.
New York’s main oil futures contract, light sweet crude for delivery in May, rose four cents to $64.42 in electronic deals before the official open of the US market.
The US Department of Energy had revealed Wednesday that US gasoline reserves plummeted by five million barrels last week — far more than market expectations for a drop of just 300,000 barrels.
“The primary driver at the moment is the data that came out, it wrong-footed the market,” Bank of Ireland analyst Paul Harris said.
“The fact it was so different from market expectations was hugely relevant coming ahead of the US driving season,” Harris said.
Motor fuel stocks are being closely watched before the driving season, which starts next month, when many Americans hit the roads for their summer holidays.
Crude futures had hit a seven-month peak of $69.58 per barrel in London on Monday as the crisis with Iran, which is the world’s fourth biggest oil producer, sparked fears that the country could disrupt exports.
However, prices tumbled as low as $66.93 in London and $63.56 in New York on Wednesday after Iranian President Mahmoud Ahmadinejad defused the crisis by pardoning the 15 sailors and marines as a “gift” to the British people.
“Prices have eased due to the definite, peaceful resolution of the row between Britain and Iran,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
“But the market is still supported by enough fundamental factors to keep prices from sliding too far down, so the easing has been rather modest.” Among the factors supporting higher prices was a sharper-than-expected fall in US gasoline or petrol inventories, recent US refinery outages and lingering concerns over Iran’s nuclear program, he added.