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Worried oil chiefs fail to find consensus

Worried oil chiefs fail to find consensus

Jul 3 09:41 AM US/Eastern

The World Petroleum Congress wrapped up Thursday in the shadow of record crude prices, with concern growing about a third oil shock but with little consensus about what to do about it.

After four days of meetings between the leading political and corporate energy bosses here, divisions between consumer and producer countries on what or who is to blame for 140-dollar oil appeared to sharpen.

Saudi Arabia, the world’s leading oil exporter, expressed concern on Thursday about new records for benchmark crude of 146 dollars a barrel and again said it was committed to dialogue between consumers and producers.

Those discussions show no sign of finding a solution to market tension, however, with both sides citing different reasons: consumers are clamouring for higher supplies while producers blame financial speculators and the falling dollar.

“We are concerned about high prices,” Saudi Arabian Oil Minister Ali al-Nuaimi said on the sidelines of the meeting here, which closes on Thursday, adding that Saudi “King Abdullah is leading the effort” for dialogue.

Top officials from consumer and producer countries met in Jeddah, Saudi Arabia, on June 22 for talks about resolving the problem of the runaway oil market, but prices have risen since then.

Since the beginning of this week, as an estimated 3,000 delegates gathered here, prices have hit almost daily new records, with comments by Iran’s oil minister that the country would react “fiercely” to an attack stoking tension.

Despite the booming conditions in the industry, there was a notable lack of optimism, with those old enough to remember previous oil shocks recalling the busts that followed afterwards.

“With oil prices hitting 140 dollars, we are clearly in the third oil shock,” declared the executive director of theInternational Energy Agency, Nobuo Tanaka, on Tuesday.

The head of Brazilian oil group Petrobas, which hopes to become a new powerhouse after annoucing huge oil discoveries, said Thursday that no-one should expect a return to low oil prices, however.

“For the future we should not expect a dramatic fall in price,” said Sergio Gabrielli, who explained this was because of rising production costs that would underpin the market.

There was also open disagreement between the Organisation of Petroleum Exporting Countries and the International Energy Agency, which represents the interests of rich, consumer nations.

In a look at the medium-term outlook for the industry, the IEA predicted a tight market for the next five years on Tuesday and warned of looming tensions from 2010 as demand for oil from Asia and the Middle East continues to grow.

It also went to great lengths to refute the notion that speculators were to blame.

“Seventy percent of crude contracts on the Nymex are held by speculators… Some form of regulation is needed,” OPEC secretary general Abdallah El-Badri replied on Wednesday, referring to the US commodity futures exchange.

“The market has no shortage of physical crude.”

He also called on the United States to stop “harassing OPEC countries.”

OPEC president Chakib Khelil also callled on the US to stop the fall of the dollar to stabilise oil prices and knocked back suggestions the cartel should increase production.

“They need to stablise the dollar. Stabilising the dollar will help,” he said on Wednesday.

A fall in the dollar makes oil cheaper for buyers using other currencies because crude is priced in the US unit on international markets.

Although record prices boost the coffers of oil producers, they are also a danger for the long-term because they encourage conservation and investment in alternative sources of energy.

Copyright AFP 2008

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