OPEC Expressed Lack of Control over Current Condition of Oil Market and Prices

A Reuters report said that Saudi Arabia and several crude oil producers in the Persian Gulf expressed the lack of control over the crude market. Moreover, they expressed that crude prices will keep on increasing sharply unless Iran and the West settle the conflict between them.

Saudi Arabia’s oil minister Mr. Ali Al Naimi and OPEC’s Secretary General Mr. Abdullah al Badri are anticipated to concentrate their speech on rising crude oil prices during the oil ministers and executives’ gathering of the International Energy Forum.

Oil ministers of the Persian Gulf OPEC stated that they wish to witness oil costs within the $100 a barrel range instead of its present level of $124. This is because they feel that the current crude oil prices may harm the global economy and may result to the sharp rise and fall in crude costs that occurred in the latter parts of 2008.

According to UAE’s oil minister Mr. Mohammed bin Fhaen al-Hamli, prices of oil are at its peak level however they are actually the result of the events in the Middle East. Peak oil costs have become a primary problem for politicians in the West who are aiming to be reelected this year such as US President Barack Obama because they worry that oil prices may stop the recovery of the unstable global economy.

Saudi Arabia, the lead producer of the OPEC, produces a majority of the spare output capacity. However, crude markets are still worried that it will not be sufficient to meet a supply cut that will result from export disruptions in Iranian oil. Earlier this year, Iran threatened to block the Strait of Hormuz, an essential passageway of crude, in case the West continues its sanctions on it due to its alleged nuclear weapons program.

According to OPEC’s former research head, Mr. Shihab Eldin, tensions surrounding the Persian Gulf are becoming increasingly real compared to the previous months. He hopes that 2012 to 2013 will end without having any form of flash point.

Mr. Eldin further added that the latest capacity in oil supply, which is set to appear online thanks to previous years’ investment, could enlarge the protection of spare capacity in case diplomacy can minimize any Persian Gulf conflict right now. He said that if the excess capacity at present is relatively low, he believes that it may be back on its average levels within one to two years.