stuff.co.nz: Opec wants crackdown on oil speculators

Reuters
Thursday, 15 November 2007

Opec officials at a summit of the producer group have said there was no easy way to crack down on speculators whom they blame for sending oil prices to a record high near $US100 ($NZ134.35) a barrel.

Oil’s climb to an all-time peak of $US98.62 on Nov. 7 has been fuelled by a flow of speculative money into the commodity, according to Opec. Some of that cash was pulled out this week, helping prices fall near $US93.

“I don’t know how to tackle them,” said Qatar’s oil minister, Abdullah al-Attiyah, when asked what should be done to rein in speculators. “They are like ghosts, how are you going to fight a ghost?”

In Vienna last week, Opec’s Secretary-General, Abdullah al-Badri, called for tighter regulation of oil markets to reduce the amount of speculative investment, but did not give more details of how that could be achieved.

Besides increased regulation, greater transparency in oil markets is the best way to deal with speculation, said Saudi Deputy Oil Minister Abdulaziz bin Salman.

But others in the Organisation of the Petroleum Exporting Countries, which is holding a heads of state summit in Riyadh on Nov. 17-18, also said there was no easy answer.

“Speculators are exaggerating what is happening,” an Opec delegate attending the summit said. “But I doubt there’s very much you can do. You have to make it less profitable to trade, but I don’t know how.”

Consumer nations are urging producers to pump more oil but Opec insists it is supplying enough. It says speculators, a weak US dollar and political tensions are driving oil’s rally.

“People are going into oil to invest,” Badri said. “It has nothing to do with supply and demand.”

Top oil executives, such as Royal Dutch Shell Plc Chief Financial Officer Peter Voser, have appeared to agree with Opec that speculation, rather than a lack of oil, has fuelled the latest price surge.

In a departure from the agency’s usual line, the head of the International Energy Agency, Nobuo Tanaka, added his voice on Wednesday to those blaming market trading for higher prices.

Others, such as the US government’s Energy Information Administration, argue that a tight world market is one of the main drivers of high oil prices.

The New York Mercantile Exchange (NYMEX), the world’s biggest commodity market, is already regulated by the Commodity Futures Trading Commission (CFTC). Its main rival the IntercontinentalExchange (ICE) is subject to a lighter touch.

But tighter regulation of oil markets looks an unlikely step, in Europe at least.

EU Commission President Jose Manuel Barroso said on Monday that the bloc was willing to work with Opec to seek ways to make the market more transparent, but it did not favour new rules.

“We resist regulation. We believe in markets,” he said at the World Energy Congress in Rome.

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