Opec says oil could hit $200
By Carola Hoyos in London
Published: April 28 2008 13:56 | Last updated: April 28 2008 13:56
Opec’s president on Monday warned that oil prices could hit $200 a barrel and there would be little the cartel could do to help.
The comments made by Chakib Khelil, Algeria’s energy minister, came as oil prices continued to hover near $120 a barrel, putting pressure on the already struggling US economy.
Some US Democratic senators have even threatened to cut off defence supplies to Opec members if the 13-member group failed to reverse its position.
But Mr Khelil blamed record oil prices on the weakness in the dollar and global political insecurity.
He told El Moudjahid, Algeria’s government newspaper: “I don’t think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years.”
He added: ”The prices are high due to the fact of the recession in the United States and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa.”
But US senators, including New York’s Charles Schumer, pin the blame directly on Opec and Saudi Arabia, its largest and most powerful member. In a letter to US President George W. Bush last week, the senators noted Saudi Arabia had cut its oil production by about 2m barrels a day over the past three years even though oil prices had continued to rise.
”At a time when high energy prices are causing widespread anxiety among American households, we question the merit of rewarding members of Opec with lucrative arms sales,” they wrote.
But even if the senators do not succeed to cut off arms shipments, the current impasse risks further deteriorating relations between the US and Saudi Arabia. Saudi Arabia has for decades remained one of the world’s most reliable suppliers of crude oil. That relationship has been strained by the west’s growing dependence on Saudi Arabia’s oil and the kingdom’s apparent unwillingness to do much to lower oil prices in the past four years.
Adam Sieminski, analyst at Deutsche Bank, pegs price expectations at $90-$100 a barrel, with an average of $102.50 for 2009. But points out: “Oil supply growth in non-Opec countries is struggling at a time when Opec has been cautious with its production policies.”
Opec ministers most recently put their oil price expectations in the $90-$120 a barrel range.
Copyright The Financial Times Limited 2008
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