By Javier Blas in London
Published: July 11 2007 11:55 | Last updated: July 11 2007 19:22
Opec on Wednesday blamed refinery shortages, geopolitical instability and speculation in the futures markets for the rise in energy costs as it ruled out an increase in its production quotas over the short term.
The statement by the Organisation of the Petroleum Exporting Countries, which controls about 43 per cent of global oil production, came after this week’s rise in Brent crude to its highest in price in 11 months.
Abdalla Salem El-Badri, Opec secretary general, said: “Inventory data continues to demonstrate that crude stocks are ample. US crude stocks are now at nine-year highs.”
Mr El-Badri added that “inadequate refinery capacity, ongoing glitches in US refinery operations, geopolitical tensions and increased speculation” were responsible for the price rise. Mr El-Badri nevertheless left the door open to a production increase if an oil “shortage” emerges.
The comments echoed a previous statement by Ali Naimi, the Saudi oil minister. Mr Naimi said present oil prices “are not at all linked to fundamentals of the oil industry”, adding that there was “a good balance between supply and demand”.
Opec twice cut production last year to stem a fall in oil prices after inventories built above historical levels. Since then oil prices have recovered about $20 a barrel, but the cartel has rejected calls by Western countries to restore output levels.
Oil prices on Wednesday consolidated close to recent highs, with trading turning volatile after the US Department of Energy reported an unexpected drop in crude inventories in the past week, and build-ups in petrol and distillates.
Crude oil inventories dropped by 1.4m barrels to 252.6m barrels, while Wall Street was forecasting a small build-up in stocks. Oil prices moved lower, however, as the same report showed larger-than-expected petrol and distillate inventories increases.
ICE August Brent was down 33 cents at $76.07 a barrel in late London trading. Nymex August West Texas Intermediate fell 5 cents to $72.76 a barrel.
Nymex August RBOB gasoline lost 4 cents to $2.33 a gallon.
In the base metals market, lead rose to a fresh all-time high above $3,000 a tonne, supported by strong consumption and the ongoing supply disruption in a key Australian port. But copper failed to regain the $8,000 a tonne level in spite of strikes in Chile, the world’s largest producer of the metal.
London Metal Exchange lead closed up 1.0 per cent on the day to $2,965 a tonne, while copper closed up 0.4 per cent to $7,940 a tonne.
Nickel recovered some ground after heavy losses in the past few weeks. The metal rose 2.2 per cent to $33,350 a tonne.
Gold retreated after hitting a five-week high on renewed concerns over the US housing market and a fall in the value of the dollar against the euro and the sterling. Gold rose as high as $665.90 a troy ounce, but profit-taking left it $2.40 weaker on the day at $660.70.
In spite of the fall, John Reade, UBS precious metal strategist, said that the rise in gold prices “marks a distinct change in behaviour by the yellow metal, whose safe-haven credentials have been tarnished by nasty sell-offs during flights to quality over the past couple of years”.
Cocoa recovered to approach its past week four-year high. London September cocoa rose 1.8 per cent to £1,101 a tonne.