Oil prices showed no sign of easing on Wednesday, soaring to new 10-year highs, as European pleas for OPEC to increase its oil production did little to calm the markets.
The North Sea Brent reference crude for October delivery soared to a new decade-long high of 33.55 dollars a barrel in afternoon trading, before easing slightly to 33.50 dollars a barrel. That was still significantly higher than its Tuesday closing value of 32.98 dollars.
Such prices have not been seen since the oil market was shaken by Iraq's invasion of Kuwait in 1990.
Industrialised nations faced with the threat of inflation from soaring energy prices have urged the Organisation of Petroleum Exporting Countries (OPEC) to increase output so as to bring prices down.
The European Commission on Wednesday called on the 11-nation cartel to undertake a "substantial increase" in output to avoid undermining the world economy, and to bring down prices by more than 10 dollars a barrel.
"The price explosion is clearly due to the crude oil market," said EU Energy Commissioner Loyola de Palacio in Strasbourg. "It is, of course, basically the consequence of OPEC's production-restriction policy.
"Around 20 dollars a barrel, that is our aim," de Palacio added.
High oil prices pose significant inflationary risks for Europe, a net importer of crude oil. Further increases could require a tightening of monetary policy by the European authorities to keep a lid on inflation.
But the market found little reassurance in Europe's appeals to OPEC.
Many analysts warned that even if the organisation mustered the political will to increase production, it would not produce enough oil to make a difference to a market starved of crude.
They noted that many OPEC countries were already producing at full capacity, and that any increase was likely to be insufficient to augment depleted stocks.
"There is no clear message from Saudi Arabia and other countries that they will significantly increase the output," said Leo Drollas, chief economist of the Centre for Global Energy Studies.
"If they decide to increase the output by 500,000 barrels per day, it means nothing, as it is already producing 500,000 more than the official target.
"It will need to increase the output between 800,000 and one million barrels if it wants the prices to go down."
The GNI brokerage said that if OPEC was genuinely committed to a stable oil price it would start trying to oversupply the market.
"We do not think they are prepared to do that, which means that consumers must expect high prices to remain this winter," it added.
GNI analyst Lawrence Eagles told AFP: "OPEC countries are already producing at full capacity, except Kuwait, the United Arab Emirates and Saudia Arabia, so it is unlikely to be more than 700,000 barrels per day. "That will not be enough to lower the prices," he added.
Saudi Crown Prince Abdullah bin Abdel Aziz has said his country is committed to maintain fair oil prices, but has not elaborated.
He was due to meet US President Bill Clinton in New York later Wednesday to discuss the mounting oil crisis. But it is Europe that most needs prices to come down.
France is grappling with protests against high fuel prices that began last week with fishermen and moved on to freight drivers, farmers, taxi drivers and even Parisian river transporters.
Rumblings of discontent have also spread to Belgian and German truckers, Spanish farmers and British motorists, while European central bankers have openly fretted about the knock-on effect on euro-zone inflation. – (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
