OPEC President Sees No Demand for More Oil
Oil producers cannot pump more without demand for extra supply, and at the moment that demand does not exist, OPEC President Chakib Khelil said on Monday.
He added in an interview on Algerian state radio that supply and demand was balanced and prices would remain high until year-end due to speculation, developments in the dollar and possible policy decisions by the European central bank.
"We cannot raise output -- whether it's OPEC producers or others -- unless there really is a demand on the world market," said Khelil, who is Algeria's energy minister.
"Now, you know that demand has shrunk this year and continues to shrink, and so demand is not there to absorb supplementary production.
"People will tell you, 'where is the demand so I can produce more?"'
On prices, Khelil said: "It's impossible to predict. Anything could happen. All I can say is that prices will be high, and will remain high until the end of the year."
In answer to a question, he said he did not think oil would rapidly breach the $200 a barrel mark, adding prices would continue to perform their habitual "yo-yo" in relation to factors like geopolitical tensions and the dollar.
Oil prices hit a record near $140 a barrel last week and have doubled from a year ago, stoking inflation and triggering protests worldwide.
U.S. crude and London Brent crude futures rose more than $2 on Monday, spurred by disruptions in Nigerian crude output and supply worries stoked by escalating tensions between Israel and Iran.
Top exporter Saudi Arabia confirmed it will lift production for a second time to 9.7 million barrels per day (bpd) in July, its highest in more than 30 years, and pledged on Sunday to pump even more if the market demanded it.
But Khelil said the issue of extra supply was beside the point.
"The problem is not about pumping or not pumping. If there isn't the demand, why would you want to pump?" he said.
"Saudi Arabia is not going to pump for the sake of pumping. They are going to pump to be able to respond to a demand. There is no real demand (for extra output) on the market as we see it."
"There is a balance between supply and demand and stocks are adequate -- currently at about 53 days of stocks, while last year they stood at 51 days."
"There is no problem with fundamentals...which in no way justify current high prices, which are due to speculation and the use of financial instruments and investments in oil commodities to generate profits that investors are unable to make in other sectors."
Khelil said the only significant new oil market factors in the past year were the U.S. subprime crisis, the rise of biofuels, and tensions involving Israel and Iran - in other words nothing specifically to do with oil supply/demand.
Turning to world refinery capacity, Khelil said this could not be increased rapidly because major industrial investments were needed.
"It takes time -- increasing refinery capacities cannot be done overnight. It takes four to five five years," he said. "The problems of refining will be with us for a fairly long time."
Algeria was investing in a $28 billion dollar, five-year programme to boost petrochemical and refinery capacity, he said.