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Oil prices to ’cause global recession’

Times OnLine: Oil prices to ’cause global recession’: “The Niger Delta People’s Volunteer Force, accusing Shell and Agip, the oil giants, of “collaboration with the Nigerian state in acts of genocide against our people”, advised the withdrawal of foreign citizens from the area.”

By Steven Downes, Posted 30 September 2004

Purnomo Yusgiantoro, the president of Opec, the Organisation of Oil Producing Countries, today admitted that the cartel was powerless to halt spiralling oil costs, as the price per barrel broke through the $50 mark in New York overnight and in Asian deals earlier today.

The Indonesia official, reacting to the latest record oil prices, warned that constantly rising oil prices could bring about a global economic recession.

“Right now, Opec cannot do anything and the high oil price can cause a recession,” he was reported as saying by AFP in Jakarta.

Mr Yusgiantoro said he had asked for data from Opec headquarters in Vienna to assess the impact of the latest rises. He blamed the price spike on unrest in Nigera and ongoing uncertainties over Russian oil firm Yukos. “Now the problem is with Nigeria and Russia. We are constantly communicating with our friends in Opec,” he said.

Opec’s next scheduled meeting, planned for Cairo in December, will not be changed, he said.

Mr Yusgiantoro had sought to reassure the nervous market saying Opec still had spare capacity on standby and urged members capable of bringing more oil online to step up production.

“Opec can still raise supply … we still have a spare capacity of 1.5 million barrels per day until the end of the year,” he said.

“We want to give an assurance to the world oil market that we have enough oil.”

But he also warned that heightened output may not bring down prices. Two weeks ago, at its meeting in Vienna, Opec declared it was raising its official production ceiling by one million barrels to 27 million barrels per day from November 1, but the decision has failed to lower prices.

The price of oil topped $50 a barrel for the first time in New York trading overnight, with Brent crude also hitting a record high, as a cocktail of woes fuelled concerns about supplies.

Benchmark US crude rose to $50.47 in electronic trading, its highest price since trading began in its current format in 1983. The price of Brent crude reached $46.80 a barrel before easing to $46.73, a rise of $0.80 on last night’s closing price.

Traders said that the increases reflected fears that Saudi Arabian unrest, Iraqi violence, the Yukos crisis in Russia and hurricanes in America could significantly reduce oil shipments.

In Nigeria, growing tensions in the Niger Delta, where rebels have threatened an “all-time war” against the Government from next month, have raised concerns over the stability of supplies from a region responsible for all of the country’s output of 2.3 million barrels per day.

The Niger Delta People’s Volunteer Force, accusing Shell and Agip, the oil giants, of “collaboration with the Nigerian state in acts of genocide against our people”, advised the withdrawal of foreign citizens from the area.

However, Shell said it was “not in any way moved” by the threat.

“We believe the Nigerian security forces are equal to the task of safeguarding oil installations and protecting workers,” a Shell spokesman said. The company yesterday confirmed it had removed about 200 non-essential workers from an area close to Soku, where it operates a gas collection facility.

The strengthening in the oil market revived fears of an increase in UK petrol prices, which have already reached 84p a litre.

Jeremy Batstone, the director of private client research at Charles Stanley, said: “It seems likely that the oil companies will respond by putting pump prices up.

“It’s difficult to say by how much but it could well be a couple of pence a litre.”

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