Geopolitics to blame for record oil prices

(Getty Images)

Opec would be happy to raise crude oil output if needed but there was no sign yet of a supply shortage in world oil markets, despite record high prices, Qatar's oil minister said on Monday.

Abdullah bin Hamad Al-Attiyah told reporters that international tensions were behind high oil prices.

"I haven't any signal that there is any shortage of crude... I believe a big portion of the oil price today is related to geopolitics and fear factors, and we cannot solve it," he said.

"Sometimes there is a shortage of oil products but not of crude. This is because of limitations of refinery [capacity]. Consumers and producers should invest more in refining. We don't have a magic stick to solve this."

Oil leapt to a fresh record high on Monday, to $93.20 a barrel as Mexico briefly halted a fifth of its production due to bad weather and the dollar struck new lows.

Oil prices have risen by more than a third since mid-August as a standoff between Turkey and Kurdish rebels, easing interest rates and winter supply fears attracted a fresh wave of capital.

Despite the surge in oil prices, Opec has shrugged off calls from importer nations to raise output, saying the problem is not one of crude supply.

Attiyah said Opec would not be able to compensate for any halt in Iran's oil exports should there be an escalation in the Islamic Republic's standoff with the West.

"We would be very happy, if there was demand, to sell all our oil - if somebody will take it why not? But what we see today is psychological demand not physical demand," Attiyah said.

Dollar weakness

Attiyah said it would also be very difficult to change oil pricing from the dollar to a new basket of currencies, though its weakness was having a negative effect on Qatar and other Gulf states which sell all of their oil, gas and petrochemical products on a dollar basis.

The issue was not on the agenda of the Opec heads of state meeting in Riyadh on November 17-18, he added, though it could be raised by any minister.

Venezuelan Energy and Mines Minister Rafael Ramirez had said on Friday that the currency issue was likely to be a topic for the meeting in the Saudi capital.

Opec ministers are also due to meet in Abu Dhabi in December.

"It is very difficult to change from the dollar. The oil industry trades in dollars," he said. "If all Opec and non-Opec producers sat together to create a new currency basket it might work, but Opec can't do it alone."

Attiyah said earlier this month Opec's agreement to raise oil output by 500,000 barrels per day (bpd) at its last meeting had so far failed to bring down high prices. That increase comes into effect at the start of November.

Qatar was pumping 838,000 bpd, against an output capacity of over 915,000 bpd, Attiyah said.

It was also set to meet its target of 77 million tonnes of liquefied natural gas (LNG) output in 2010, he said, from around 31 million tonnes this year.

Attiyah said output from the country's north field, which is the largest reservoir of pure gas in the world, stood at around eight billion cubic feet of gas per day. Output from the field will be tripled by around 2012 to 24 billion cubic feet of gas per day, the equivalent of about five million bpd of oil, he said.

Qatar is the world's largest exporter of LNG, gas chilled to liquid form to allow for shipment on tankers. - Reuters

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