Oil prices are artificially high: S Arabia

Associated Press

Vienna, March 30:

In spite of the current high prices for crude, markets are already well supplied and any decision by OPEC to pump more oil at this time would be destructive, Saudi Arabia’s oil minister said on Tuesday.Ali Naimi blamed investors and speculators for driving prices up to 13-year highs and said that current prices ‘have absolutely nothing to do with supply and demand’ for crude. He spoke to reporters as OPEC representatives arrived in Vienna to review the oil market and set output policy for the crucial second quarter of the year.

The Organization of Petroleum Exporting Countries meets on Wednesday to decide whether to follow its agreement last month to cut its crude output target by 4 per cent, or 1 million barrels a day, starting April 1.The meeting comes amid unexpectedly strong demand for oil in Asia and the United States. However, OPEC members fear that demand will soon slow due to a seasonal lull in purchases during the second quarter, and they had agreed to trim output to prevent a damaging fall in prices. Given the recent price rise, delegates were saying that they might consider several options at the meeting, including postponing or even abandoning their planned cut.Naimi’s argument against any increase in production carries special weight because Saudi Arabia is the biggest and most influential of OPEC’s 11 members. He said OPEC must reduce its output target as planned, arguing there was already a surplus of crude and that adding more oil now would further weaken the soft market expected in the second quarter.

However, Kuwaiti oil minister Ahmed Fahd al-Ahmed Al-Sabah said OPEC should postpone its production cut until it meets again in June “unless there is an emergency,” he told reporters before boarding a plane for Vienna.

OPEC supplies about a third of the world’s oil. Its current output target is 24.5 million barrels per day.Prices have soared to uncomfortably high levels, with US light, sweet crude reaching a 13-year high of $38.35 per barrel on March 17. US crude futures for May delivery were trading early Tuesday at $35.80 per barrel, up 35 cents, in New York. In London, May contracts of North Sea Brent crude were trading 15 cents higher at $31.89 per barrel.

Despite announcing two production cuts in six months, OPEC has boosted its actual output to try to keep pace with the rising market.

OPEC agreed on February 10 in Algiers, Algeria, to reduce its output ceiling by 1 million barrels a day to 23.5 million barrels a day starting on Thursday, to try to keep prices from tumbling this spring.But the decision isn’t inexorable, as United Arab Emirates oil minister Obaid bin Saif al-Nasseri told the pan-Arabic newspaper Al Hayat in an interview published on Tuesday.Al-Nasseri said the likely outcome of the Vienna meeting would be a delay in OPEC’s production cut. The decision at the Algiers meeting “has been taken, but that does not mean it cannot be reviewed. It is not sacred,” the paper quoted him as saying.

OPEC’s president, Purnomo Yusgiantoro, warned against overproduction. By June, global crude supplies could exceed demand by as much as 4 million barrels per day compared to a normal supply “overhang” of 1.5 million barrels per day, he said Monday. “It’s very important that we take wise and corrective measures” this week, he argued.Even if OPEC agrees to postpone or abandon its planned reduction, that won’t bring much consolation to American motorists, who are paying record prices for gasoline.