OPEC President: No need to raise supply

Saudi Arabia's King Abdullah, right, talks to Saudi oil minister Ali Naimi in Jiddah, Saudi Arabia, recently. The United States and other nations argue that oil production has not kept up with increasing demand, especially from China, India and the Middle East. Saudi Arabia and other OPEC countries say there is no shortage of oil and instead blame financial speculation and the falling U.S. dollar. (AP Photo/Hasan Jamali, file)

The Associated Press

6/24/2008

BRUSSELS, Belgium — OPEC President Chakib Khelil said Tuesday that oil producers saw no need to raise supply and blamed record oil prices on factors outside the cartel’s control, such as U.S. pressure on Iran and the weak U.S. dollar.

Following talks with European Union nations, Khelil said oil states believe they are pumping enough oil to satisfy demand and there is also stock and capacity to spare.

Oil prices traded above $137 a barrel during trading on Tuesday. Price hit a record $139.89 earlier this month.

Khelil said prices in the next few weeks depend largely on how the U.S. deals with Iran and the strength of the U.S. dollar.

The U.S., supported by the European Union, wants Iran to permanently halt uranium enrichment, a technology that can give Iran the capacity to produce materials for a nuclear bomb if it wanted. Iran denies that, saying it only wants to produce energy.

“I think the market is probably waiting to see how the dollar is going to evolve in July, how the geopolitical situation is going to evolve with the threats made on Iran,” he said.

“I don’t think OPEC can do much about the geopolitics,” he said. “I think some other people have to do something about that because if you have threats in areas that are producing areas or potentially producing areas, then of course the market will react to it.”

The Organization of the Petroleum Exporting Countries is making sure there is plenty of supply, he said.

“All you need to do is to look at the data to be convinced that the market is well supplied in oil and that we have enough surplus capacity and that we have enough stocks in the market,” Khelil said.

Khelil blamed high prices on the U.S. mortgage crisis. Banks became fearful of lending to each other last summer when complex securities based on U.S. housing loans to people with poor credit emerged as far more risky than first believed.

He also blamed speculators that have sought higher returns in commodities markets.

Khelil said OPEC is concerned that record oil prices are “destroying demand.”

EU nations held talks with OPEC countries Tuesday to seek ways to ease the soaring cost of oil, which has propelled inflation to record highs, hurting Europe’s economy and drawing violent protests from truck drivers and fishermen who fear losing their livelihood.

Europe imports nearly 80 percent of the oil it uses at an estimated cost of some 1 billion euros ($1.55 billion) a day at recent price levels.

EU officials told OPEC that they expect European demand for oil to remain level over the next 20 years even as it seeks to wean itself off a growing dependence on energy imports by seeking new suppliers and developing more homegrown alternatives.

The 13 OPEC members have for years gathered regularly to establish production quotas. They control some 40 percent of world oil output. Despite the current surge in oil prices and growing global demand, they have refused as a group to boost production.

However, Saudi Arabia, the world’s largest oil producer, has said it would add 200,000 barrels per day in July to a 300,000 barrel per day production increase it first announced in May, raising total daily output to 9.7 million barrels.

OPEC members include: Algeria, Angola, Ecuador, Iran, Iraq, Libya, Nigeria, Saudi Arabia, Venezuela, Kuwait, Qatar and the United Arab Emirates.