Opec rejects US call to increase production
Thursday, 15 November 2007
Javier Blas in Riyadh and Ed Crooks in Rome, FT Syndication Service
Opec on Wednesday rejected calls from the US, its largest customer, to agree to increase production when it meets for its summit in Riyadh at the weekend.
Abdulla El-Badri, Opec secretary general, said that there was "not shortage of oil" in the market and deferred any decision on production to the next ministerial meeting of the oil producers' cartel in Abu Dhabi in December.
"At this time, frankly, we don't see that we need to add any oil, but this is up to the ministers to decide" Mr El-Badri said in a press conference, suggesting that the ministers of the oil cartel might decide against raising production at the Abu Dhabi meeting.
The comments came after Samuel Bodman, the US energy secretary, urged Opec on Tuesday to raise production this weekend. He said the price of oil was at such high levels in part because developed countries' stocks were below their five-year averages.
West Texas Intermediate (WTI) crude oil recovered on Wednesday from previous losses. In early London trading, it was 53 cents higher to $91.70 a barrel. WTI traded as high as $98.62 a barrel last week and has been trading in a band from $80 to nearly $100 a barrel since mid-September, raising concerns of an inflation spike.
Mr El-Badri said, however, that the "US should help to resolve the problem" and enumerated several factors, among them bottleneck in refining, geopolitical concerns and the weakness of the US dollar, that were affecting the oil price.
"The US has not invested in refining capacity in 30 years. The refineries are operating at 80 per cent. That is not adequate," Mr El-Badri said. "We have also the problem of the dollar," the secretary general added.
Opec, has already said that it will not discuss a production increase at this weekend's heads of state meeting. But Mr Bodman told reporters at the World Energy Congress in Rome: "I have asked that that be reconsidered. I have asked them to increase production."
He said he was trying to draw Opec's attention to the fact that the inventory numbers were "troubling". The US's call on Opec comes after a similar request from China, the second world's largest consumer, and the European Union.
Mr El Badri reiterated that Opec was not interested in "high or low prices, but in a stable market" and said that the group did not want to see "shortages".
However, the prospect of an Opec production increase next month receded on Tuesday after the International Energy Agency, the west's watchdog, said high prices were starting to hit demand for crude.
The IEA cut its forecast for demand for the rest of this year and next.
"There are strong signs that higher prices are depressing demand," the watchdog said after oil prices had moved close to the $100-a-barrel mark.
In its November monthly oil market report, the IEA cut its fourth-quarter demand forecast by a hefty 500,000 barrels a day to 87.1m b/d, bringing the cumulative demand adjustment over the past four months to 1m b/d.
Nauman Barakat, of Macquarie Futures in New York, said: "Demand destruction may finally become a lot more of a factor as a result of the dramatic price rise in the last four months."
Opec on Wednesday rejected calls from the US, its largest customer, to agree to increase production when it meets for its summit in Riyadh at the weekend.
Abdulla El-Badri, Opec secretary general, said that there was "not shortage of oil" in the market and deferred any decision on production to the next ministerial meeting of the oil producers' cartel in Abu Dhabi in December.
"At this time, frankly, we don't see that we need to add any oil, but this is up to the ministers to decide" Mr El-Badri said in a press conference, suggesting that the ministers of the oil cartel might decide against raising production at the Abu Dhabi meeting.
The comments came after Samuel Bodman, the US energy secretary, urged Opec on Tuesday to raise production this weekend. He said the price of oil was at such high levels in part because developed countries' stocks were below their five-year averages.
West Texas Intermediate (WTI) crude oil recovered on Wednesday from previous losses. In early London trading, it was 53 cents higher to $91.70 a barrel. WTI traded as high as $98.62 a barrel last week and has been trading in a band from $80 to nearly $100 a barrel since mid-September, raising concerns of an inflation spike.
Mr El-Badri said, however, that the "US should help to resolve the problem" and enumerated several factors, among them bottleneck in refining, geopolitical concerns and the weakness of the US dollar, that were affecting the oil price.
"The US has not invested in refining capacity in 30 years. The refineries are operating at 80 per cent. That is not adequate," Mr El-Badri said. "We have also the problem of the dollar," the secretary general added.
Opec, has already said that it will not discuss a production increase at this weekend's heads of state meeting. But Mr Bodman told reporters at the World Energy Congress in Rome: "I have asked that that be reconsidered. I have asked them to increase production."
He said he was trying to draw Opec's attention to the fact that the inventory numbers were "troubling". The US's call on Opec comes after a similar request from China, the second world's largest consumer, and the European Union.
Mr El Badri reiterated that Opec was not interested in "high or low prices, but in a stable market" and said that the group did not want to see "shortages".
However, the prospect of an Opec production increase next month receded on Tuesday after the International Energy Agency, the west's watchdog, said high prices were starting to hit demand for crude.
The IEA cut its forecast for demand for the rest of this year and next.
"There are strong signs that higher prices are depressing demand," the watchdog said after oil prices had moved close to the $100-a-barrel mark.
In its November monthly oil market report, the IEA cut its fourth-quarter demand forecast by a hefty 500,000 barrels a day to 87.1m b/d, bringing the cumulative demand adjustment over the past four months to 1m b/d.
Nauman Barakat, of Macquarie Futures in New York, said: "Demand destruction may finally become a lot more of a factor as a result of the dramatic price rise in the last four months."