Oil prices hit all time high
VIENNA, Austria (AP) - March 5, 2008 Oil prices surged for the first time past $104 a barrel after
the OPEC announcement and the release of a U.S. government report
showing a surprise drop in crude oil stockpiles.
The 13-nation Organization of Petroleum Exporting Countries said
it would maintain current production levels because crude supplies
are plentiful and demand is expected to weaken in the second
quarter.
OPEC President Chakib Khelil told reporters the global market is
being affected by what he called "the mismanagement of the U.S.
economy," and that America's problems were a key factor in the
cartel's decision to hold off on any action.
"If the prices are high, definitely they are not due to a lack
of crude. They are due to what's happening in the U.S.," Khelil
said. "There is sufficient supply. There's plenty of oil there."
Khelil's comments came one day after U.S. President George W.
Bush lashed out at the organization, warning Tuesday: "I think
it's a mistake to have your biggest customers' economies slowing
down as a result of higher energy prices."
White House spokesman Dana Perino said Wednesday that Bush was
"disappointed" OPEC didn't do more to rein in prices, which some
say are pushing the U.S. economy into recession.
Analyst John Hall, of John Hall Associates in London, said OPEC
probably should have added oil to the market as Bush had asked.
"But in this time of intense geopolitical tension, it would be
difficult for Saudi (Arabia) or any other producer to acquiesce
simply because President Bush had asked them to," he said. "In
the short term, any true respite for the consumer is still out of
reach."
Although OPEC opted not to intervene, it did pledge to maintain
"constant vigilance" over the market.
Khelil said he and OPEC's secretary-general were authorized to
call an extraordinary meeting or hold phone consultations "at any
time, depending on the pressures on the market" - an apparent
gesture to ease global economic jitters.
There had been some speculation that OPEC might actually cut
production - a move that would drive prices even higher, along with
profits for cartel members - but Khelil said a cut was not
discussed at Wednesday's meeting. He said OPEC had no plans to meet
again before its next scheduled conference in September.
Earlier in the week, price hawks Venezuela and Iran indicated
they planned to push for less production.
Khelil said crude stocks were well within their five-year
average and the 13-nation group was not inclined to either boost or
reduce its current output of about 32 million barrels a day. OPEC
satisfies roughly 40 percent of the world's demand for crude.
OPEC said it "highlighted the economic slowdown in the U.S.,
which, together with the deepening credit crisis in financial
markets, is increasing the downside risks for world economic growth
and consequently demand for crude oil."
"Crude oil prices are being strongly influenced by the weakness
in the U.S. dollar, rising inflation and significant flow of funds
into the commodities market," it said.
Oil shot up a dramatic 19 percent last month as the falling
dollar prompted speculators and other investors to shift cash to
crude and other commodities as a hedge. Among other reasons for the
spike: tensions in the oil-rich Middle East and Turkey's incursion
into northern Iraq.
Key cartel members said this week that prices in the $85 to $90
per barrel range would be optimal.
But oil's only direction Wednesday was up.
Light, sweet crude for April delivery rose $2.02 to $101.54 a
barrel in electronic trading on the New York Mercantile Exchange by
the afternoon in Europe - amid growing expectations that it stood
to climb even higher.
"There's an ongoing stampede to be a part of the crude oil
rally," said Tim Evans, an analyst at Citigroup Inc., in New York.
Hall said OPEC was partly to blame for economic woes in the U.S.
and elsewhere. "By helping the price to rise, they have fueled
inflation and they're fueling recession," he said.
But Stephen Schork, editor of The Schork Report, which keeps
tabs on global energy markets and trends, said the cartel may not
have had much choice.
"If you're OPEC, you see ample supplies and questionable
demand," he said.
Schork gave OPEC credit for not pushing through a cut in output,
which "would legitimize the bullish speculation we've seen since
February" and risk sending oil to $120 a barrel or higher.
Crude inventories are growing, including "a massive increase"
in U.S. stocks, Schork said.
"It's certainly a comfortable supply situation," he said.
The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia,
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United
Arab Emirates and Venezuela. Iraq is the only member not subject to
the cartel's output quotas.
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On the Net:
OPEC, http://www.opec.org