JEDDAH, 17 October 2007 — Organization of the Petroleum Exporting Countries (OPEC) chief Abdalla Salem El-Badri said yesterday that the organization was “concerned” at the recent surge in oil prices and was convinced that the current record high prices were not justified by the fundamentals.
“OPEC is doing all it can and is carefully watching developments in the oil market and has observed with concern the recent escalation in oil prices,” El-Badri said from Vienna. Yesterday, world oil prices hurtled to fresh record highs, striking over $88 per barrel in New York amid fears over tensions between Turkey and Kurdish rebels in crude producer Iraq.
Oil thundered more than $2 to a new peak above $88 a barrel yesterday, extending a $9 rally since last week on tight supplies, strong demand and growing tensions in northern Iraq.
At 1620 GMT, US crude was up $1.71 at $87.84 a barrel after rising as high as $88.20. London Brent was up $1.60 at $84.35 a barrel.
There is no fundamental justification for a price run-up that has lifted oil from below $70 in mid-August, say officials from the group that pumps more than a third of the world’s oil.
“OPEC cannot do much now,” Libya’s top oil official Shokri Ghanem told a news agency. “OPEC did all that it can.”
At its meeting in September, with oil a touch below $80, the OPEC agreed to boost output by 500,000 barrels per day (bpd) from Nov. 1 to soothe consumer concerns of tight supplies and costly fuel.
But oil is now closing in on the inflation-adjusted high of $90.46 seen in 1980, with investors citing rising tension between Turkey and Kurdish separatists in Iraq, robust oil demand growth, tight fuel stocks and a weak dollar.
Custodian of the Two Holy Mosques King Abdullah, meanwhile, yesterday reshuffled the Supreme Council for Petroleum and Mineral Affairs, which is chaired by him. Crown Prince Sultan is deputy chairman.
The council’s members are: Foreign Minister Prince Saud Al-Faisal, Labor Minister Ghazi Al-Gosaibi, State Minister Matlab Al-Nafeesa (who is also the council’s secretary-general), Commerce and Industry Minister Hashim Yamani, Petroleum and Mineral Resources Minister Ali Al-Naimi, Finance Minister Ibrahim Al-Assaf, Economy and Planning Minister Khaled Al-Gosaibi, Mohammed Al-Suwaiyel, president of King Abdul Aziz City of Science and Technology, and Aramco’s President and CEO Abdallah Jum’ah. The latest oil price rise follows a similar trend in gold whose price rose to a record high on Monday.
“However, the oil price rise has evidently nothing to do with rising gold prices,” Dhafer Al-Qahtani, co-CEO and chief investment officer at Dammam-based Arbah Capital, told Arab News.
“All indications were there about the rising oil price,” he said, adding that a major pointer was supply was not meeting rising demand. The Middle East situation is escalating in all directions involving countries like Turkey, Iraq, Iran and Syria. That’s why supply is not catching up with demand.”
“I will not be surprised if it goes up to $90 or $95 a barrel sooner than expected. Winter conditions that will boost oil demand will aggravate the situation further. In reality, production is not online with demand so supply is short and price will go higher and higher,” Al-Qahtani said.
He hinted that the rising oil price would have its impact on many other fields of economic activity. “Inflation will grow globally. There will be all-round price increase. Air travel, especially, will become costly. And there will be a renewed cry for finding a cheaper substitute or alternative energy source,” Al-Qahtani added.
— With input from Abdul Ghafour
