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18 April 2024

Opec says more oil won't help world economy

By Agencies


Opec on Thursday looked set to rebuff consumer calls for more crude, saying it was powerless to help stave off recessionary pressures in the West.

Enjoying a sixth year of crude price gains, the Organization of the Petroleum Exporting Countries argues it can do little to help avoid a slowdown in the United States, its leading customer, that could curtail demand for the cartel's oil.

"I don't see what increasing supply of oil will do to the economy, psychologically maybe it would help but I doubt it," said Opec President Chakib Khelil ahead of Friday's 0900 GMT meeting.

"I think the market is well supplied and it's not necessary to raise output," said Iranian Oil Minister Gholamhossein Nozari.

US crude last traded down 58 cents on Thursday at $91.75 a barrel.

Delegates said Gulf producers Saudi Arabia, Kuwait and the United Arab Emirates would not argue the case for more oil, even though they would prefer lower prices.

"The majority of Opec ministers are not happy with the current high price but it is decided by the market," one senior Opec delegate said.

The United States has led the appeal for more crude from Opec, saying that lower fuel costs would bolster an economy now sliding towards recession.

Opec raised supply in September but, for the second meeting since then, looks likely to disappoint hopes among importers for another increment to tame prices that broke $100 a barrel early this year.

"Opec has already done more than was required from the last meeting when we increased supply by 500,000 (barrels a day)," said Khelil. "I haven't heard any country mention a production increase."

Shipping data suggests Saudi Arabia is producing more than its official entitlement to meet robust winter demand.

Independent analysts estimate Riyadh is pumping some 300,000-400,000 barrels a day on top of its Opec target of near 8.9 million bpd.



Opec takes the view that it can do little to prevent a downturn led by the US housing market crisis and the resulting credit crunch.

Khelil, oil minister for Algeria, said Opec had no power to influence turbulent world financial markets and bore no blame for inflated energy costs.

"This crisis has nothing to do with the oil price, oil supply and demand," Khelil told reporters. "We have not gouged the world economy like some people think."

Opec has no official price target and ministers are divided between price hawks keen to keep crude as high as possible and those who worry that $90 crude will slow energy demand growth.

Khelil estimated that psychological factors and geopolitics were adding a $30 premium to the "real" price level warranted by the fundamentals of global supply and demand.

Annual average US crude prices have risen from near $22 barrel in 2002 to just over $72 in 2007 with this year's average to date at $92.98.

With Friday's decision seemingly a foregone conclusion, the price hawks in Opec are already lining up to push for a possible reduction in supplies when the 13-member group next meets in early March.

"We have to monitor if there is a fall in demand and if there is a fall in the price, if that happens -- like the fall in the price so far this year -- we would be in favour of a cut in output and probably propose it at the next meeting," said Venezuelan Oil Minister Rafael Ramirez. (Reuters)