OPEC hit by dwindling $US

Ninemsn.com ^ | 4 December 2003 | none

[shrinkermd]

AFP - The depreciation of the US dollar is eating up the gains made by OPEC members from high oil prices and has become a main factor in the decision making process of the cartel ahead of its next meeting.

"Current prices are right, the dollar is weakening, its purchasing power is quite weak," Saudi Arabian Oil Minister Ali Al-Nuaimi said on his arrival in Vienna which hosts the headquarters of the 11-member Organisation of Petroleum Exporting Countries.

"We want to keep the prices where they are ... within the purchasing power of old good dollar," he added.

OPEC's president Abdullah bin Hamad Al Attiyah, who is also Qatar's energy minister, said "the weak dollar is making a lot of concern."

He estimated the purchasing power of the greenback compared to the Europeansingle currency had dropped by more than 35 per cent from a year ago and saidconsumers in eurozone were "enjoying huge discounts at the expense of the (oil)producers."

Libyan Oil Minister Abdulhafid Zlitni said "the drop in the dollar justifies the current price" of crude oil, hovering above the 22-28 dollar per barrel band targeted by OPEC.

"The present level of prices should be acceptable to everybody.

"The dollar has weakened and it goes against the trade of (oil) producing countries," he added.

But both Nuaimi and Zlitni said 22-28 dollar per barrel price band sought by the cartel for its reference basket of crudes will not be changed, despite a suggestion by fellow OPEC member Venezuela to hike it to 25-32 dollars.

"I don't think we will raise the current band even if the price goes above the upper end," said the Libyan.

Attiyah said it would be "unrealistic" for the cartel to discuss a shift to pricing oil in euros.

Analyst Bill Farren-Price, from the Cyprus-based Middle East Economic Survey (MEES), said Nuaimi's comment indicates that the "Saudis may be prepared to tolerate a price above the 22-28 dollar band."

He said the Saudis would be satisfied with a price of 28 dollars for Brent North Sea benchmark crude, or 30 dollars for US benchmark West Texas Intermediate.

OPEC's basket of crudes trades usually lower than Brent and WTI.

"There is serious concern about the loss of the US dollar," said Farren-Price.

"The weakening of the US dollar affects purchasing power" of OPEC members whose budgets and economic development plans rely heavily on the export of crude oil priced internationally in the US currency.

Most OPEC members, including Saudi Arabia, have said the cartel should maintain its current 24.5 million barrel per day (bpd) ceiling when it meets Thursday, but hinted that production should be slashed in the second quarter of 2004, as seasonal demand decreases and output from oil producing countries from outside the cartel is expected to rise.

Oil prices since June have stayed close the 28 dollar mark, and often hovered above it, with demand now driven by the winter season in the northern hemisphere and rapid economic growth in the United States and China.

At 1700 GMT the price of Brent North Sea crude oil for January delivery was at $US28.92 dollars in London, after opening at 28.85 dollars on Wednesday and closing at 28.94 dollars Tuesday.

In New York, the price of light sweet crude for January delivery lost 13 cents to trade at $US30.65 in the morning.

[shrinkermd]

FYI. I have news for the OPEC oil sheiks: Congress, the President and the Federal Reserve can depreciate the dollar faster and more effectively than you can restrict production.

[Fledermaus]

Poor oil sheiks! And I'm laughing at their whining about oil at $25-28 a barrell being "acceptable"!

I remember in the early to mid-eighties that idiot banks (mostly Savings & Loans which is why they mostly went belly up) were loaning money to companies figuring a barrell of oil would hit $60!

Ha! Reagan fooled them and deregulated our pricing structure and controls. Now people whine if the price of gas goes near $2 a gallon for unleaded which is more costly to produce than the good old days of basic leaded gasoline that in 1979-1982 was pushing $2 a gallon.

Where some people hurt by this? Sure. Someone always is when markets change for whatever reason. The speculators in the price of oil got totally screwed because of their bad assumptions and I was surprised Bush 41 allowed the government to bail them out.

[Prodigal Son]

"The weakening of the US dollar affects purchasing power" of OPEC members

LOL, so buy more American stuff then. If European stuff is too expensive, buy what your dollars can afford you.

[Hermann the Cherusker]

Isn't it amazing that a gallon of gasoline only costs about $1.50, despite having to be pumped out of the groun in a war zone, shipped half way across the world, refined in an expensive petrochemical plant, and then shipped to final destination ... and yet a gallon of milk which can be squirted for almost nothing out of a cow costs twice as much? Or that a gallon of water bottled for sale, which gushes up free out of the ground mind you, costs about the same $1.50?

[taxcontrol]

If I were OPEC, I would price oil by gold ounce equilents and then accept either US or EU.

[Fledermaus]

And don't forget almost 40% of that price of a gallon of gasoline is federal and state taxes!