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Crude Oil Prices Rise to Record on Concern About OPEC Capacity

Aug. 3 (Bloomberg) -- Crude oil futures rose to a record on concern that the Organization of Petroleum Exporting Countries is unable to boost production to meet increasing demand.


OPEC, source of more than a third of the world's oil, raised production in July by 1.4 percent to an average of 29.71 million barrels a day, according to a Bloomberg survey of oil companies, producers and analysts. It was the highest since an average of 30.72 million in 1979, according to U.S. Energy Department figures.


``What we see this year is that most countries produce close to maximum capacity,'' said Jeroen van der Veer, the chairman of the Royal Dutch/Shell Group in an interview in New York. ``People wonder how much spare capacity is in the system.''


Crude oil for September delivery rose 33 cents, or 0.8 percent, to settle at $44.15 a barrel on the New York Mercantile Exchange, the highest closing price since futures began trading in New York in 1983. Prices were 37 percent higher than a year earlier.


In London, the September Brent crude oil futures contract rose 67 cents, or 1.7 percent, to settle at $40.64 a barrel on the International Petroleum Exchange, the highest closing price for a most-active oil contract since trading began in 1988.


Potential Disruptions


Oil has risen on concern about attacks on Iraq pipelines and potential disruptions to exports from Russia and OPEC members who are pumping near capacity. Oil shipments on supertankers from the Persian Gulf rose to a three-month high in July, according to data compiled by Bloomberg.


``If prices continue to rise what can OPEC do? Prices are crazy,'' OPEC President Purnomo Yusgiantoro said in Jakarta. Saudi Oil Minister Ali al-Naimi yesterday ``said they can increase supplies, but it cannot be done immediately. It needs time,'' Purnomo said.


OPEC agreed last month to go ahead with a plan to raise the group's output ceiling by 500,000 barrels a day to 26 million barrels a day starting on Aug. 1.


Most of the July increases in OPEC output came from Saudi Arabia, the world's top exporter, and Iraq. The Saudis raised daily production by 100,000 barrels to 9.36 million.


Iraq's output rose 220,000 barrels to 2 million barrels a day. Iraq pumped 2.48 million barrels a day in February 2003, before the U.S.-led invasion.


An Energy Department report tomorrow will show that U.S. inventories fell last week, a Bloomberg survey indicated. Supplies probably declined by 1 million barrels from 300.5 million, according to the median of forecasts by 12 analysts. Nine of the analysts expected declines and three forecast an increase.