OPEC: Speculation is Driving Oil Prices

Record-high crude prices have nothing to do with supply and demand but rather are caused by speculation and a weak dollar, OPEC Secretary General Abdullah al-Badri said on Tuesday.

World leaders have hounded OPEC to pump more as prices hurtle towards $130 per barrel, but Badri said the organization would not act on production levels until it was warranted by market fundamentals.

"There is a lot of oil in the market, stocks are very high, about 53 days forward," he said in an interview with Reuters during a visit to OPEC founding member Venezuela. "We are worried because these prices have nothing to do with supply and demand."

U.S. crude rose to a new record above $129 a barrel earlier on Wednesday.

The International Energy Agency on May 13 reported that oil stockpiles in OECD countries equaled 53.3 days of demand in March, at the same time revising down its forecast for world oil demand growth in 2008 because of record prices and slower economic growth.

Badri warned prices could keep rising due to non-market factors such as a continued decline in the dollar, but said the organization sees no reason to hold an extraordinary meeting before the next one scheduled for September.

Oil prices topping $129 per barrel have sparked anger from consumer nations that have accused OPEC of gouging, but Badri said the boom in oil prices has lifted commodities prices across the board, which has made it more expensive to pump oil.

"I'm not an advocate of high oil prices," he said, adding that the situation "is not a bonanza for us" because higher prices for commodities ranging from food to steel have created new expenses for producer nations.

"If you want to produce more oil now, you have to pay more," he said.

Asked if OPEC was considering moving away from the plummeting dollar as a way of stabilizing energy markets, Badri said: "It's not something that happens overnight to move from currency to currency, every country has its own policy."

Angry Consumers

The United States House of Representatives passed legislation on Tuesday allowing the U.S. to sue OPEC members for working to set crude prices - though the White House has threatened to veto the measure.

"It's their policy and I'm not going to challenge it, but I think this is not the way to handle any problem, problems should be solved with dialogue" he said. "You cannot go and just blame OPEC or try to abolish OPEC."

An OPEC decision to raise output could help ease the price rally, which energy analysts say has been fuelled largely by resilient world energy demand even as the United States economy slows.

Badri's visit to Venezuela comes amid continued disputes over the South American nation's oil production figures.

Official statistics show output close to 3.1 million barrels per day (bpd), but agencies such as the U.S. Department of Energy say production is only around 2.5 million bpd.

Badri said he met with Venezuelan Energy Minister Rafael Ramirez to discuss the issue.

"For us the principal information we get is from Venezuela," he said, referring to official production figures. "But when we look at secondary sources they say something different. We are working together to see how we can solve this problem."