The Organization of Petroleum Exporting Countries (OPEC) decided Wednesday to hold production levels flat, despite more calls from many oil consuming countries to increase output to curb rising oil prices.
Analysts said the 13-nation cartel insisted on the "balance" of the supply and demand in the current international oil market, as there is a downward tendency of crude demand due to the US economic slowdown, bleak world economic situation and warmer weather.
According to the data released by the Energy Information Administration, gasoline demand is lowered by about 1 percent over the last six weeks compared to the same period last year. At the same time, gasoline supplies rose last week to a 15-year high.
In addition, analysts said the increase in OPEC's output levels seems not to have curbed the surging oil prices. The cartel increased its crude oil output by 500,000 barrels last September, but the move failed to stop the rising trend.
Oil prices have increased by 30 percent since September 2007. World oil prices surged Wednesday, rising by a remarkable 5 US dollars a barrel to a new record of over 104 dollars.
Chakib Khelil, OPEC's rotating president and Algerian energy minister, said, "There is sufficient supply. There's plenty of oil there," adding that OPEC would be vigilant about the uncertainty and volatility in the international oil market and would "take action at any time" when necessary before the next ministerial meeting in September.
Khelil said the current oil prices were mainly influenced by the devaluation of the US dollar and speculation in the market as well as the geopolitical crisis.
He said the global market is being affected by "the mismanagement of the US economy," and that America's problems were a key factor in the cartel's decision to hold off on any action.
Some analysts also considered the speculation in the market as a driving force behind the surging oil prices.
They said speculators have shifted cash to crude and other commodities as a hedge against the weaker dollar and inflation as the US economy slows due to the credit crunch, the mortgage crisis and high energy costs.
Analysts take the CalPERS Investments as an example. Last month, the largest public pension fund with assets totaling 240 billion dollars announced it will increase investment in the commodities market to 7.2 billion dollars by 2010. The report stimulated the prices of crude oil and gold in the international commodity market.
In addition, the geopolitical crisis such as escalating tensions in Iran, Iraq and worsening ties between the United States and Venezuela were further contributing to the rising oil prices.
In the meantime, there had been speculation that OPEC might actually cut production – a move that would drive prices even higher, along with profits for cartel members – but Khelil said a cut was not discussed at Wednesday's meeting.
(Xinhua News Agency March 6, 2008)
