Oil prices 'will not come down' says OPEC boss
By Edmund Conway
The cost of a barrel of crude oil has edged closer to its all-time high after OPEC president Chakib Khelil warned that oil prices “will not come down”. Ahead of a meeting with EU officials in Brussels today, he said that the cartel had done all it could to ease prices.
His comments pushed up benchmark crude in London by $1.24 to $137.15 a barrel - it hit an all-time high of $137.69 a barrel on June 6. The spot price - the cost of buying a barrel of oil for delivery that day - has risen close to $140.
European Union Energy Commissioner, Andris Piebalgs, said he was “not convinced” speculators are to blame and repeated his call for the Organization of Petroleum Exporting Countries to pump more oil and scrap production quotas. But OPEC Secretary-General Abdalla el-Badri said: “The market is currently hijacked by speculators,” including hedge funds. “There is no shortage of supply as I said before.”
OPEC members besides Saudi Arabia have no intention of raising output to bring down near-record prices, he said. This will be the “main point” for today’s discussions, which will also include Mr Khelil and French Energy and Environment Minister Jean-Louis Borloo.
Saudi Arabia, the world’s biggest oil exporter and OPEC producer, plans to raise production for a third straight month in July and will further increase output as needed to curb record-high prices above $135 a barrel.
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Saudi Oil Minister Ali al-Naimi announced the increase at last weekend’s summit of 35 producing and consuming countries in the Saudi port city of Jeddah. Mr Khelil and ministers from Venezuela and Libya have said the Saudi initiative would fail to lower prices.
Speculators have almost doubled their share of the New York oil futures market, according to figures provided for the US Congressional Energy and Commerce Committee by the Commodity Futures Trading Commission.
Between 2000 and this April their share of West Texas Intermediate contracts rose from 37pc to 71pc, with the rest accounted for by companies such as airlines hedging against price rises.
Many analysts now expect crude prices to shoot up towards $200 a barrel as the growth in global demand for energy outpaces the supply.
However others, including billionaire investor George Soros, have warned that the price could soon fall back sharply, and that the price looks like a bubble.
John Dingell, chairman of the Congressional committee, said the growth in speculative activity "raises troubling concerns about whether the oil future prices have become de-linked from underlying supply and demand fundamentals and whether the commodities markets have become a casino for unscrupulous speculators who profit at the expense of the American people".
Presidential nominee Barack Obama has pledged to control oil speculation if he gains office, ensuring, among other things, that US energy futures cannot be traded offshore unregulated.
Julian Jessop, of Capital Economics, said: "I've no doubt that there is some speculative froth in the market... it's impossible to prove if it is contributing $5 or $50 to the price.
"More recently [since April] speculative positions have been flat or falling, while prices have been rising sharply," he added, saying speculative activity could not explain the recent sharp increase in price from $100 to almost $140 a barrel.
However, analysts expect that with China, Indonesia and other emerging nations cutting subsidies on their domestic oil prices, demand may soon drop.
The fact that oil prices have risen, rather than fallen, may embarrass Gordon Brown, the Prime Minister, who flew out yesterday to the Jeddah meeting to urge producers to pump more crude.
The cost of a barrel of crude oil has edged closer to its all-time high after OPEC president Chakib Khelil warned that oil prices “will not come down”. Ahead of a meeting with EU officials in Brussels today, he said that the cartel had done all it could to ease prices.
His comments pushed up benchmark crude in London by $1.24 to $137.15 a barrel - it hit an all-time high of $137.69 a barrel on June 6. The spot price - the cost of buying a barrel of oil for delivery that day - has risen close to $140.
European Union Energy Commissioner, Andris Piebalgs, said he was “not convinced” speculators are to blame and repeated his call for the Organization of Petroleum Exporting Countries to pump more oil and scrap production quotas. But OPEC Secretary-General Abdalla el-Badri said: “The market is currently hijacked by speculators,” including hedge funds. “There is no shortage of supply as I said before.”
OPEC members besides Saudi Arabia have no intention of raising output to bring down near-record prices, he said. This will be the “main point” for today’s discussions, which will also include Mr Khelil and French Energy and Environment Minister Jean-Louis Borloo.
Saudi Arabia, the world’s biggest oil exporter and OPEC producer, plans to raise production for a third straight month in July and will further increase output as needed to curb record-high prices above $135 a barrel.
advertisement
Saudi Oil Minister Ali al-Naimi announced the increase at last weekend’s summit of 35 producing and consuming countries in the Saudi port city of Jeddah. Mr Khelil and ministers from Venezuela and Libya have said the Saudi initiative would fail to lower prices.
Speculators have almost doubled their share of the New York oil futures market, according to figures provided for the US Congressional Energy and Commerce Committee by the Commodity Futures Trading Commission.
Between 2000 and this April their share of West Texas Intermediate contracts rose from 37pc to 71pc, with the rest accounted for by companies such as airlines hedging against price rises.
Many analysts now expect crude prices to shoot up towards $200 a barrel as the growth in global demand for energy outpaces the supply.
However others, including billionaire investor George Soros, have warned that the price could soon fall back sharply, and that the price looks like a bubble.
John Dingell, chairman of the Congressional committee, said the growth in speculative activity "raises troubling concerns about whether the oil future prices have become de-linked from underlying supply and demand fundamentals and whether the commodities markets have become a casino for unscrupulous speculators who profit at the expense of the American people".
Presidential nominee Barack Obama has pledged to control oil speculation if he gains office, ensuring, among other things, that US energy futures cannot be traded offshore unregulated.
Julian Jessop, of Capital Economics, said: "I've no doubt that there is some speculative froth in the market... it's impossible to prove if it is contributing $5 or $50 to the price.
"More recently [since April] speculative positions have been flat or falling, while prices have been rising sharply," he added, saying speculative activity could not explain the recent sharp increase in price from $100 to almost $140 a barrel.
However, analysts expect that with China, Indonesia and other emerging nations cutting subsidies on their domestic oil prices, demand may soon drop.
The fact that oil prices have risen, rather than fallen, may embarrass Gordon Brown, the Prime Minister, who flew out yesterday to the Jeddah meeting to urge producers to pump more crude.
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