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OPEC: There's too much oil on the market
Associated Press
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Published: 9/8/2008 8:40 AM | Updated: 9/8/2008 11:54 AM

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VIENNA, Austria -- There is too much crude on global oil markets, senior oil officials from Iran and Libya said Monday, as the price of oil continued a two-month slide.

But the energy minister of the United Arab Emirates said OPEC's policy of keeping the world oil market "well supplied" has not changed.

Minister of Energy Mohammed Bin Dhaen al-Hamli was also quoted by UAE's state news agency as saying that crude oil stockpiles in heavily consuming countries are within recent average levels.

Al-Hamli added that decisions on production levels are based on whether the market is well supplied and the recent fall in prices shows that the earlier rise was "too high, too fast."

The comments came on the eve of a meeting of OPEC oil ministers who will discuss production levels. Oil prices have fallen nearly 30 percent from their highs of $147 in July.

Iran, the group's No. 2 producer, has been one of the most vocal proponents of tightening the oil spigots.

"We believe the market is oversupplied," Iran's oil minister, Gholam Hossein Nozari, told reporters.

Echoing those comments, Shokri Ghanem, the chairman of Libya's National Oil Corp., told The Associated Press, "There is a glut in the market that warrants creating order."

He said that OPEC members producing above assigned quotas should be urged to curb output.

Saudi Arabia, the dominant OPEC member, boosted production by 250,000 barrels per day after repeated protests from Western nations, and direct pleas from President Bush.

Libya's Ghanem now says the market is oversupplied.

"There is a lot of oil in the market, much more than demand," he said.

If production is cut, most industry experts expect it will be a token amount, though it would come two months after crude prices hit all time highs above $147.

But the tumble in oil prices may have given the 13 members of OPEC an opening to review production levels.

Since crude surged to a record $147.27 a barrel on July 11, it has tumbled more than $40. Over the summer, OPEC resisted calls by the U.S. and other Western nations for more oil. Oil ministers, however, blamed speculators and a weak U.S. dollar for crude's rise.

The greenback has since strengthened, global economies have slowed and investor appetite for commodities has cooled. The crude market has begun to look terribly bearish.

And after rising as high as high as $109.89 a barrel, oil prices began to slip Monday.

Light, sweet crude for October delivery fell $1.38 to $104.85 on the New York Mercantile Exchange, as Hurricane Ike lost strength over Cuba.

The downward spiral has led Iran to suggest that it is time to reduce output from the nearly 30.5 million barrels a day being pumped last month by the organization's members.

Not far behind is Venezuela. While moderating recent demands for immediate output cuts, Venezuelan Oil Minister Rafael Ramirez has drawn the line at $100 per barrel of oil. Anything below that should serve as a wake-up call for OPEC, he says.

Still, a major cutback is unlikely without Saudi compliance, and the Saudis -- de-facto OPEC policy setters who are now producing nearly a third of total OPEC output -- have given no hint they favor that option. Saudi Oil Minister Ali Naimi has instead talked about a floor of $80.

OPEC has reason to be cautious.

Despite their precipitous fall, prices remain 14 percent higher this year than in 2007, and a barrel of benchmark crude still fetches four times what it did five years ago.

Any OPEC move Tuesday to pare back output would result in protests from the U.S. and other major consumers.

Energy has become a major issue in the upcoming U.S. presidential election, with both Republican presidential candidate John McCain and Barack Obama, his Democratic counterpart, calling for reduced dependence on foreign oil.

U.S. political leaders, however, have been saying the same thing for decades and imports of foreign fuel has only surged.

OPEC knows that high prices drive down demand and the organization will likely try to find a balance between high profits and a price that the market can accept.

OPEC may also agree to pare production without reducing the overall output quota of 27.3 million barrels a day set in November for the 12 OPEC members under production limits.