Experts rule out Opec role in oil price increase

Opec is not to blame for soaring oil prices which have hit 13-year highs as members pump up to maximum capacity, but the producers’ group must do more to calm a nervous market, Gulf analysts say. Unexpectedly strong economic growth in some industrialised nations as well as China and India, has driven demand for the crude to higher levels, pushing prices to around $40 a barrel in New York on Wednesday, the highest since 1990.

Fear of terrorist attacks on oil installations in the Middle East, especially in Saudi Arabia, prospects of shortages in petrol in the US and a drop in world inventories have all contributed to the rise.

“The situation is highly explosive worldwide now, because of lingering fear that oil installations could be targeted by fresh attacks, endangering production,” said Kamel Al Harami, a former Kuwaiti oil official.

“Normally, at this time of year, demand drops by at least two million barrels per day (bpd) for seasonal reasons, but the actual demand has in fact increased because of strong world economic growth,” Al Harami said.

Gunmen attacked a Saudi oil facility at the industrial port of Yanbu on the Red Sea on Saturday, killing five staff at European engineering group ABB and a member of the Saudi National Guard.

“It is clear that the market is reacting to a demand-driven problem. Opec is currently far exceeding production ceilings and most members are producing to almost maximum capacity,” Abdulwahab Abu-Dahesh, senior economist at Riyad Bank, said.

“The problem is not caused by Opec. They are producing 2.5 million bpd above their output quota of 23.5m bpd. The problem is that demand for oil spiked at a time when stocks were lower than average,” he said.

Saudi economist Bishr Bakheet, head of Bakheet Financial Advisers, believes that “real” oil prices are not high if inflation rates and the price index of other commodities were taken into account.

“Consumers’ cry about high prices appears to be totally political. Real oil prices are not high if factors of inflation and high increases of prices of internationally-traded commodities were considered,” Bakheet said.

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