RIYADH, 16 April 2008 — Minister of petroleum and Mineral Resources Ali Al-Naimi met International Energy Agency (IEA) Executive Director Nobua Tanaka yesterday and discussed what the Saudi official news agency said was a “balanced oil market.”
Saudi Arabia is the world’s top oil exporter and the only producer with significant spare capacity that could be brought on line quickly. But Al-Naimi said last week that oil markets were well supplied and that high prices were not due to any shortage.
“They tackled during the meeting the situation in the international petroleum market and its stability where there is an equilibrium between supply and demand and stocks are at appropriate levels,” SPA reported.
The rise in oil prices “stems from several reasons which are not necessarily linked to market fundamentals,” SPA said.
It gave no direct quotes from either official. Tanaka said last week he saw oil markets becoming more balanced, with demand falling.
The IEA, energy adviser to 27 industrialized countries, made the deepest cut in its world oil demand growth estimates for seven years last week because of the global economic slowdown.
Meanwhile, oil prices jumped to a new peak near $114 a barrel yesterday amid lingering supply worries and weakness in the US dollar, deepening concern in world consumer nations that a spike in energy costs could cause severe economic damage.
Britain’s prime minister, Gordon Brown, yesterday called on OPEC members to boost production to counter rapidly rising oil prices, which have shot up 80 percent since a year ago, adding his voice to similar requests from the administration of US President George W. Bush.
“We are not producing enough oil... and we can take collective action to persuade OPEC and others to get the oil price down,” Brown said in an interview on Sky Television.
US crude rose $1.80 to $113.56 a barrel by 1735 GMT, after touching a record high of $113.93. Oil is up about 18 percent from the start of the year and more than 80 percent since last April.
London Brent crude was up $1.73 at $111.57, after hitting a record high of $111.85.
Oil and other commodities have rallied in recent months due to record weakness in the US dollar. A weak dollar tends to raise prices for commodities denominated in that currency by boosting non-US spending power and by attracting investors seeking an inflation hedge.
“One thing that is clearly driving the oil price is that the US dollar has gotten substantially weaker in the past several months and quarter,” said Richard Batty, energy analyst at Standard Life.
The dollar recouped some losses versus the euro yesterday after US Treasury data showed foreigners increased purchases of US assets in February.
Oil dealers said they were also closely monitoring oil shipments from Mexico, the world’s 10th-largest crude exporter, after foul weather interrupted operations at its three main oil ports over the weekend.
The Mexican government said yesterday that two of the ports had reopened, but one remained shut for the third straight day.
Adding to worries over tight supply, Chinese data yesterday showed imports of diesel zoomed 49 percent higher in March. China’s March crude oil imports also rose sharply, according to data released last week. Despite surging oil prices, OPEC has said it is producing enough and that a US economic slowdown may weaken consumption in the second quarter. “Current OPEC production at more than 32 million barrels per day will be sufficient to both meet demand growth and contribute to further stockbuilds,” the Organization of the Petroleum Exporting Countries said in its latest Monthly Oil Market Report. OPEC, which pumps more than a third of the world’s oil, has pointed to US dollar weakness, speculative inflows and political tensions as key factors driving prices rather than a lack of oil.