Oil climbs higher as OPEC seen powerless

Oil climbs higher as OPEC seen powerless
REUTERS

SEPT 6: Oil prices raced to yet another 10-year peak on Wednesday as anxious dealers feared OPEC would fail to ease a supply shortage when its ministers meet on Sunday.

International benchmark Brent crude climbed 52 cents to a new peak of $33.50 a barrel before slipping to $33.30 for a gain of 32 cents, fuelled by bullish concerns over low petroleum stockpiles. US light crude futures were up 34 cents at $34.17.

High fuel costs are rattling the United States and other major crude consumers who are crying out for more oil. But OPEC states which supply about a third of internationally traded petroleum say tight supplies of refined products like heating oil are keeping prices up rather than any severe shortage of raw material crude.

OPEC powerhouse Saudi Arabia tried to spell out that reality to a nervous market on Tuesday. Influential Saudi Oil Minister Ali al-Naimi said the world's biggest oil exporter sees no problem in adding extra crude to world supply even though markets are not as tight as current record prices suggest.

"There is absolutely no problem putting additional crude oil into the market," Naimi told reporters at a business gathering. "But we must be extremely careful that efficiency is required by people running refineries. Eventually people will realise that the industry is living with less inventories. Eventually a lot of this price is hype," he added.

Naimi's comments did little to ease traders' concerns. "With demand statistics being revised dramatically all of the time, how will Saudi Arabia actually know when the market needs more oil?," asked GNI Research in its daily energy report.

"If it is not prepared to act on price alone there is the real risk of a squeeze at some stage this winter."

OPEC statements are not soothing Saudi Arabia's key Western ally the United States, where high fuel costs are a combustible issue in the election year. The market is waiting to see what will transpire after Saudi Crown Prince Abdullah meets US President Bill Clinton on Wednesday to discuss issues that include energy.

OPEC delegates have said Saudi Arabia wants an output rise bigger than 500,000 barrels per day when the cartel meets in Vienna on September 10. Traders also believe OPEC will have to turn up its taps by a higher level than that to cool prices.

But OPEC states fear raising output by a substantial amount could deliver the group's worst nightmare as it is about to celebrate its 40th anniversary -- a price slump.