interesting reading

A bit of interesting reading

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Winter fuels oil price rise threat

By Ian Lovett

09may05


IF you thought lower petrol prices may be making a comeback after the world price of oil dipped below $US50 a barrel last week, think again.

A leading oil producing nation warned on the weekend that oil prices could spike sharply if there was a cold spell in the Northern Hemisphere and fuel consumption suddenly took off.

The problem was that a key oil producing cartel, the Organisation of the Petroleum Exporting Countries (OPEC), was already producing at almost peak capacity and would have no extra supplies to stop a price surge. This was the sobering message from a gathering of OPEC oil members when they met in Algeria last weekend.


Algerian oil minister Chakib Khelil and a leading member of OPEC warned over the weekend oil prices could surge and OPEC would still not be able to pump one more extra barrel.

He said the world's supply of oil was not a bottomless pit.


"The only way we are going to have a slack in prices is if the economy really slows down. Prices around $US50 a barrel were not a concern," he said, raising the spectre of prices continuing at these levels for the foreseeable future.


"Nobody is raising the issue with prices [at around $US50], [US Federal Reserve Chairman Alan] Greenspan, the Europeans or [US President George W.] Bush."


Mr Khelil said the danger period for the world was the northern winter when the world's peak demand kicks in.

Northern winter starts in October and ends in March.


"Let's assume we go to a maximum [in output] and assuming we don't have any [significant] stocks, we are not going to meet demand in the fourth quarter [northern winter]," said Mr Khelil.


"What you need to do is raise stocks in the third quarter to accumulate enough of them in the third quarter that you can deplete stocks and maintain a high level of production for the fourth quarter.


"That's what I've been saying we [at OPEC] need to do."


US light crude settled US13c higher at $US50.96 a barrel on the weekend after breaking over $US52 earlier in the session.

OPEC pumps about 40 per cent of the world's oil.


OPEC production has risen steadily since the start of the year, and US Government data released last Wednesday showed commercial crude stocks rising 2.6 million barrels last week to 327 million barrels, their highest since July 1999.
From todays Melbourne Herald-Sun, 9/5/2005, ...........
http://www.heraldsun.news.com.au/common/story_page/0,5478,15218969%255E462,00.html