OPEC: Don't Blame Us for Oil Prices

By Marek Strzelecki, Spencer Swartz and Adam Smallman


Of DOW JONES NEWSWIRES


WARSAW -(Dow Jones)- OPEC oil ministers, led by Saudi Arabia's Ali Naimi, indicated Wednesday there was nothing they could do to quell oil prices running at 11 month highs because much of the blame lies at the door of a logjam in fuel production. Naimi, head of oil policy in the world's biggest oil exporter, said global oil markets had plenty of crude and the recent jump in energy prices was driven by geopolitical concerns and refining bottlenecks, not shortages.


"Let me say that (current) oil prices are not at all linked to fundamentals of the oil industry," Naimi said at a briefing in Warsaw. "There is good balance between supply and demand," Naimi said in his first comments in some months on the state of world oil markets.



"OPEC does not find any reason at the moment to increase its production of crude oil," Organization of Petroleum Exporting Countries President Mohamed Al Hamli told reporters in Abu Dhabi. Qatar's Oil Minister Abdullah bin Hamad Al Attiyah told reporters: "The world is facing a shortage of gasoline and diesel, but not crude oil.


"If the market needs more oil, OPEC will do its utmost but it needs to be convinced that there is a shortage," he said. The remarks put to rest any suggestions by some market players that Saudi Arabia might put more barrels into the markets to temper the rapid rise in oil prices, which have jumped $6 a barrel in the past month.


At 1304 GMT the Brent front-month August contract was down 31 cents at $76.37 a barrel, with U.S. light, sweet crude in New York 22 cents lower at $72.59 a barrel.


Stockpiles



In late 2006, Naimi spurred market jitters with his concern over the pace of growth in oil stockpiles held by member nations of the Organization for Economic Cooperation and Development.


Those stockpiles, which had ballooned to more than 120 million barrels above levels a year previously, indicate the numbers of days of consumption available to the OECD and Naimi warned about their potential price-depressing effect as they climbed toward 55 days of consumption.


Though oil prices did indeed fall sharply to below $50 a barrel in January, stockpiles shrunk by almost 1 million barrels a day in the first quarter, igniting concerns by the International Energy Agency that the medium-term cushion of inventories remains in a fragile state.


In the short term, and excluding global gasoline inventories that are bumping near the bottom of their five-year average, crude stocks are on the rise, climbing almost 11 million barrels at the end of April to 967 million barrels, with forward cover almost unchanged at 55 days.


"Nobody is looking for additional crude now because all you have to do is to look at the level of inventories which are in very, very comfortable positions," Naimi said. "Inventories are higher than they have been in the past five years," he said, adding the kingdom is currently pumping 8.6 million barrels a day.


Critics of OPEC say the 12-nation producer group has focused too much on inventories in the U.S., the world's biggest energy consumer, and stockpiles elsewhere in the world, such as China, aren't at record levels. Some analysts say while global oil supplies overall are little changed from a year ago, refining runs worldwide are up by 1 million barrels a day, tightening the energy complex further.


Naimi said he wasn't aware of any plans for OPEC to meet before scheduled policy talks Sept. 11 in Vienna. Saudi Arabia, by far OPEC's biggest oil producer, has kept a tight leash on supplies since OPEC began implementing two oil production cuts last November.


The targeted OPEC cuts total 1.7 million barrels a day, or about 6% of world demand.
Current OPEC production, which meets almost 40% of world demand, is around 1 million barrels a day lower compared with this time last year.


-By Marek Strzelecki, Spencer Swartz and Adam Smallman, Dow Jones Newswires; +48 22 622 2767; marek.strzelecki@dowjones.com