World Mining Exploration News

Oil leaders try once more to slash soaring crude prices

A week after failing to deflate record oil prices at a summit in Saudi Arabia, the world’s biggest crude producers and consumers will get another chance to tackle the problem at a meeting this week.

More than 3,000 delegates, including leading corporate and political figures, are to meet here at the 19th World Petroleum Congress (WPC), which runs from Monday to Thursday after an official opening reception on Sunday.

“It’s the Olympics of the oil and gas industry,” WPC director Pierce Riemer told a press conference.

The gathering follows a surge in oil prices on Friday that took both New York light sweet crude and Brent North Sea crude to record levels near $143 a barrel as a drop in global equities markets sent investors into commodities.

With oil over $140 a barrel, traders are now expecting to see crude prices at $145 and even $150, analysts say.

A senior Iranian oil official said he expected crude prices to rise to $150 a barrel in the near future with the onset of higher demand in summer, the semi-official Mehr news agency reported on Saturday.

“As we get near the final days of the current month and the arrival of the high-consumption summer season, the possibility of a hike in the price of oil increases,” Hojjatollah Ghanimifard told the news agency.

Iran, the world’s fourth-largest oil exporter, has repeatedly said the market is well-supplied and has blamed rising prices on speculation, a weak US dollar and geopolitical tension.

Oil has more than doubled in the past year not only due to the dollar’s decline, but also because of rising global demand, particularly in fast-growing economies such as China and India. Supply outages in the Middle East and Nigeria as well as falling production in Mexico have also contributed to the price rise.

The sharp increase in oil prices has driven a similar rise in gas prices in developing countries, like the Philippines where fuel prices have risen 16 times since January and the pump price of gasoline has soared to more than P60 a liter.

Opec, ExxonMobil

At the Madrid summit, the president of the Organization of Petroleum Exporting Countries (OPEC), the head of the International Energy Agency and ministers from Nigeria, Russia, Venezuela, India, France and the Netherlands are expected to be present.

The OPEC officials and energy ministers are to be joined by the bosses of major international oil groups—ExxonMobil of the United States, CNOOC of China, British Petroleum and Shell of Britain, Rosneft of Russia and Total of France.

Saudi Arabia convened a hastily arranged meeting of consumers and producers in Jeddah last weekend to tackle the problem of record oil prices, which the OPEC president predicted would touch between $150 and $170 in the coming months.

Most experts agreed that the only concrete result of the Jeddah meeting was Saudi Arabia’s announcement that it would increase daily production by more than 200,000 barrels to 9.7 million—and that it could significantly step this up if necessary.

The gathering pitted producers against consumer nations, which are calling for an increase in production.

Most OPEC members remain firmly opposed to any increase in their production. They blame speculators and the fall in the US dollar for the remarkable run-up in prices.

Finding solutions

Jorge Segrelles, the head of the WPC organizing committee, said the Madrid meeting was intended to be “a forum for actively finding solutions.”

But given the differences in assessment of the situation between consumer and producer countries, the head of energy at the consultancy group Capgemini, Colette Lewiner, saw little chance of an agreement.

“There might be declarations of intent, but there will not be a consensus in the short term,” Lewiner said.

The main event, which will take place in Madrid’s Ifema conference center, also faces competition from a rival meeting that environmentalists have called to promote alternatives to crude oil as an energy source.

Weak dollar and stocks

The latest record oil prices came as the dollar fell against the euro in afternoon trading on Friday.

“The dollar was slightly stronger, and when it gave up its gains, that gave oil the green light,” said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.

The market now believes the US Federal Reserve is unlikely to raise interest rates in the near future. Because higher rates tend to strengthen the dollar, traders are anticipating that it will continue to fall and, consequently, that investors will keep turning to commodities, including oil, as a hedge against inflation.

“Oil’s back in favor, especially with people bailing out of the stock market,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.

The stock market’s recent swoon is also sending investors in search of higher-yielding investments. On Thursday, the Dow Jones industrial average fell nearly 360 points. In afternoon trading on Friday, the main US stock index was down more than 100 points.

“When money has nowhere to go, it is parked in commodities as they are among the investment instruments that actually rise the more money you pour into it,” said Oliver Jakob, an analyst at Petromatrix Gmbh, in Switzerland.