JEDDAH, Saudi Arabia (AFP) – Consumer nations stepped up pressure on the oil powers on Sunday to increase production at an international summit on spiralling crude prices in the Saudi city of Jeddah.
Divisions within OPEC were exposed as Saudi Arabia was to increase production by 200,000 barrels a day and Kuwait said it was ready to follow, but the cartel’s president insisted that opening the taps further is not the answer to the price crisis.
The summit started with roundtable talks among the 36 countries and top international institutions and 30 major oil companies on the causes of the surge to nearly 140 dollars a barrel.
The United States, Germany, India, Australia and other major consumers came to the meeting, called by Saudi Arabia’s King Abdullah, appealing for greater supplies to slake the world economy’s thirst for oil.
But the summit hosts and other top providers are also demanding action against “speculators” that they blame for the astonishing rise over the past year.
US Energy Secretary Samuel Bodman insisted that “there is no evidence that we can find that speculators are driving futures prices” to current record heights.
“Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices,” he told a press briefing late on Saturday.
“Even despite higher global production for oil so far this year, inventories have been drawn down and production capacity is below historic levels.”
Warning that prices would almost certainly rise further, Bodman said: “In the absence of any additional crude supply, for every one percent increase in demand we would expect a 20 percent increase in price in order to balance the market.”
German Economy Minister Michael Glos said: “We need more oil in the world market quickly in order to stop the spiralling prices at the gas pumps”. He wrote in an article for the Sunday newspaper Bild am Sonntag that prices have passed the “limit” acceptable to consumers.
India’s Finance Minister P. Chidambaram and Australia’s Resources and Energy Minister Martin Ferguson also called for oil producing nations to increase their output, diplomats said.
Saudi Arabia has said it will step up production by 200,000 barrels to 9.65 million barrels a day from July. And Kuwaiti Oil Minister Mohammed al-Olaim said on Sunday that OPEC members “will not hesitate” to increase production if the market needs it.
But OPEC president Chakib Khelil insisted there is enough oil to supply the market.
“We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply,” the Algerian oil minister told a briefing.
“Why would you have a supply problem when demand is going down,” he said.
Khelil said the 13-nation Organisation of Petroleum Exporting Countries had decided no special meeting on production was needed now and that a decision would be made at a regular OPEC meeting in September.
“We believe speculation, in its noble and not noble terms, has its impact,” the OPEC chief said.
Khelil refused to answer questions about why Saudi Arabia has decided to increase its output.
He said much of the price explosion can be explained by turmoil around the dollar. “A lot of people are talking about the uncertainties about the reserves. But what about the uncertainties on the dollar?” he said.
Before the summit, Saudi Deputy Petroleum Minister Prince Abdulaziz bin Salman said: “What is bringing us together is a sincere wish to be responsible.
“We will meet demand,” the prince vowed. “If demand requires more crude, we shall sell it.”
A Saudi source said there is scope for other countries to follow his country’s example as there is up to three million barrels of spare capacity within OPEC nations.
British Prime Minister Gordon Brown, the senior western leader at the summit, has called for a “new deal” between consumers and producers.
He wants producer nations to “invest in countries like ours, and oil consumers like us with good companies, with good technology and skills can invest in the oil-producing countries.”
Brown said in an interview with The Guardian newspaper that the world was going through “the biggest of all three oil shocks” and called it “the downside of globalisation.”