OPEC president Chakib Khelil on Tuesday rebuffed calls from oil consuming countries to increase supply, saying the cartel had already done what it could on high prices.
“OPEC has already done what OPEC can do and prices will not come down,” Khelil told journalists as he arrived for a meeting with EU energy officials in Brussels.
However, Saudi Arabia’s increased output, to counter the fears of inflation-hit consumers, exposed divisions within OPEC at the summit, with Khelil and others opposed to a production hike.
“Other member countries don’t want to increase their production because, as they’ve said many times, from our perspective we don’t see any shortage in the market,” OPEC secretary general Abdullah al-Badri said.
Oil prices rose towards 138 dollars a barrel on Tuesday, closing in on record highs amid lingerong concerns about supplies from the cartel.
In the face of calls from consumer countries for an oil output hike, al-Badri insisted that “the market is full of oil,” blaming “other factors” for the high price of crude, including refinery problems and hedge funds piling into the market.
Khelil blamed high prices on the US “subprime crisis and the ensuing impact of the dollar devaluation and the influx of funds that were loooking for good returns that they could not find in other investments.”
He estimated that hedge fund zeal for positions in the oil market added 40 dollars to crude prices.
With oil supply currently greater than demand, Khelil said that the course oil prices take in the coming months depended on the dollar’s exchange rate and geopolitical tensions.
“The market is probably waiting to see how the dollar is going to evolve in July, (and) how the geopolitical situation is going to evolve with the threats on Iran,” Khelil said.
“If you can answer those questions, I can answer the question on price.”
EU Energy Commissioner Andris Piebalgs urged OPEC to do away with the grouping’s production ceiling in order to provide relief to the market.
“In my opinion, there is no reason to keep ceilings on production,” he told journalists.
“If there are no ceilings, markets will adapt much faster,” he added. “In this respect we could expect prices to go down, not going up as the tendency has been till now.”
French Energy Minister Jean-Louis Borloo, whose country takes on the European Union’s rotating presidency in July, stressed that high oil prices were a concern for consumers and producers alike.
“There’s not the producers on one side and consumers on the other,” he said. “We’ve entered a period where we really have to agree on a global energy pact because our interests are clearly linked.”
“We’ve got to decrease our energy needs. Producer countries have to participate, there needs to be clarity and transparency about needs and supply,” he told journalists.
Borloo said that although financial market speculation “exacerbated” high oil prices, it “did not create them.”
“What’s true is that the mass of the financial markets has jumped into commodities,” he said.
Piebalgs also said he was “not convinced” that speculation on financial markets was “a major factor” behind high oil prices.
“The basic difference between us and OPEC is that they believe that it is mostly speculation and in my opinion it is that market fundamentals that are not responding any more and that’s why the prices are going up,” he said.
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