Gold9472
03-16-2005, 09:36 PM
OPEC says it has lost control of oil prices
Cartel producers say they can't keep up with strong global demand
By John W. Schoen Senior Producer MSNBC
Updated: 4:13 p.m. ET March 16, 2005
Despite a pledge by OPEC ministers to increase oil production, don't expect much of a break on oil prices. With crude oil prices hitting a record $56 a barrel Wednesday, OPEC ministers meeting in Iran have been grappling with a problem they haven’t confronted in the cartel’s 45-year history. In the past, OPEC tried to cool overheated prices by pumping more when supplies got too tight. But most OPEC producers say they’re already pumping as fast as they can. And despite the high cost of a barrel of crude, world demand shows no signs of slowing.
To help stop the surge in prices, OPEC ministers agreed to pump an extra half million barrels of oil a day beginning April 1. OPEC said it would consider pumping more later if the extra oil doesn't push prices lower.
But even before the decision was announced, some ministers had openly expressed doubts that the move will do any good, saying they’ve run out of options in trying to rein in the price of crude. Global oil demand has taken up most of the slack in extra OPEC capacity. Consumption is now believed by many analysts to be pressing up against the limits of what the world can produce. Saudi Arabia is the only country believed to have any surplus production left, and even then the Saudis are pumping close to 90 percent of capacity, according to the U.S. Department of Energy.
"There is not much we can do,” Algerian Oil Minister Chakib Khelil told reporters Tuesday in Isfahan, Iran, the site of Wednesday’s meeting.
"OPEC has done all it can do.” Qatar Oil Minister Abdullah al-Attiyah said. “This is out of the control of OPEC."
The oil markets seem to agree. After word came that OPEC pledged to pump harder, oil prices surged Wednesday on concerns about the latest weekly reports on inventories.
Crude for April delivery rose $1.41 to settle at $56.46 a barrel Wednesday, the highest price for the commodity on the New York Mercantile Exchange since it introduced crude oil futures trading in March 1983.
Crude prices soared after the EIA reported that domestic gasoline stocks in the March 11 week fell 2.9 million barrels to 221.4 million barrels -- nearly three times the decline forecast by analysts. A year ago, gasoline stocks stood at 202.4 million barrels.
And even as President Bush expressed concern Wednesday about rising oil prices, he cited tight global supplies -- not OPEC policies -- for the price surge.
“I think if you look at all the statistics, demand is outracing supply and supplies are getting tight. And that’s why you’re seeing the price reflected,” Bush said.
OPEC's admission that has lost control of oil prices hasn’t eased political pressure on the cartel. On Tuesday, several oil ministers said they had received calls from U.S. Energy Secretary Sam Bodman. Sen. Ron Wyden (D Ore.) said Tuesday he’s not convinced that OPEC’s hands are tied by global demand reaching the limits of production capacity.
Though data on OPEC’s oil production capacity have always been hard to come by, there’s little disagreement on the rapid growth of global consumption -- especially in China and India. With worldwide demand this year rising by roughly 2 million barrels per day, whatever excess capacity is out there will be gone soon, according to Marshal Adkins, an oil industry analyst at Raymond James
“Maybe this year, but certainly in ‘06 there won’t be any excess capacity,” he said. “We haven’t been in that kind of market^ in our lifetime. You’ve always have more capacity than demand.”
That’s little solace to energy consumers, who are watching rising crude oil prices push pump prices to record levels. Though U.S. economy has yet to show signs of slowing and inflation remains low, a continued rise in oil prices will eventually slow growth, analysts say.
“We will find the price level that will slow demand,” said Adkins. “It may be $60; it may be $100. I think it’s fair to say its going to be in that price band.”
End Part I
Cartel producers say they can't keep up with strong global demand
By John W. Schoen Senior Producer MSNBC
Updated: 4:13 p.m. ET March 16, 2005
Despite a pledge by OPEC ministers to increase oil production, don't expect much of a break on oil prices. With crude oil prices hitting a record $56 a barrel Wednesday, OPEC ministers meeting in Iran have been grappling with a problem they haven’t confronted in the cartel’s 45-year history. In the past, OPEC tried to cool overheated prices by pumping more when supplies got too tight. But most OPEC producers say they’re already pumping as fast as they can. And despite the high cost of a barrel of crude, world demand shows no signs of slowing.
To help stop the surge in prices, OPEC ministers agreed to pump an extra half million barrels of oil a day beginning April 1. OPEC said it would consider pumping more later if the extra oil doesn't push prices lower.
But even before the decision was announced, some ministers had openly expressed doubts that the move will do any good, saying they’ve run out of options in trying to rein in the price of crude. Global oil demand has taken up most of the slack in extra OPEC capacity. Consumption is now believed by many analysts to be pressing up against the limits of what the world can produce. Saudi Arabia is the only country believed to have any surplus production left, and even then the Saudis are pumping close to 90 percent of capacity, according to the U.S. Department of Energy.
"There is not much we can do,” Algerian Oil Minister Chakib Khelil told reporters Tuesday in Isfahan, Iran, the site of Wednesday’s meeting.
"OPEC has done all it can do.” Qatar Oil Minister Abdullah al-Attiyah said. “This is out of the control of OPEC."
The oil markets seem to agree. After word came that OPEC pledged to pump harder, oil prices surged Wednesday on concerns about the latest weekly reports on inventories.
Crude for April delivery rose $1.41 to settle at $56.46 a barrel Wednesday, the highest price for the commodity on the New York Mercantile Exchange since it introduced crude oil futures trading in March 1983.
Crude prices soared after the EIA reported that domestic gasoline stocks in the March 11 week fell 2.9 million barrels to 221.4 million barrels -- nearly three times the decline forecast by analysts. A year ago, gasoline stocks stood at 202.4 million barrels.
And even as President Bush expressed concern Wednesday about rising oil prices, he cited tight global supplies -- not OPEC policies -- for the price surge.
“I think if you look at all the statistics, demand is outracing supply and supplies are getting tight. And that’s why you’re seeing the price reflected,” Bush said.
OPEC's admission that has lost control of oil prices hasn’t eased political pressure on the cartel. On Tuesday, several oil ministers said they had received calls from U.S. Energy Secretary Sam Bodman. Sen. Ron Wyden (D Ore.) said Tuesday he’s not convinced that OPEC’s hands are tied by global demand reaching the limits of production capacity.
Though data on OPEC’s oil production capacity have always been hard to come by, there’s little disagreement on the rapid growth of global consumption -- especially in China and India. With worldwide demand this year rising by roughly 2 million barrels per day, whatever excess capacity is out there will be gone soon, according to Marshal Adkins, an oil industry analyst at Raymond James
“Maybe this year, but certainly in ‘06 there won’t be any excess capacity,” he said. “We haven’t been in that kind of market^ in our lifetime. You’ve always have more capacity than demand.”
That’s little solace to energy consumers, who are watching rising crude oil prices push pump prices to record levels. Though U.S. economy has yet to show signs of slowing and inflation remains low, a continued rise in oil prices will eventually slow growth, analysts say.
“We will find the price level that will slow demand,” said Adkins. “It may be $60; it may be $100. I think it’s fair to say its going to be in that price band.”
End Part I