Business | Oil & Gas
Crude prices are too high - UAE
The UAE said yesterday market fundamentals do not justify current high global oil prices, and reiterated that it can raise production if the market requires.
- By Shakir Husain, Staff Reporter
- Published: 00:04 May 30, 2008
Dubai: The UAE said yesterday market fundamentals do not justify current high global oil prices, and reiterated that it can raise production if the market requires.
Ali Obaid Al Yabhouni, the UAE's Opec governor, expressed concern that oil prices are rising "too fast too high", and this is bad for both producers and consumers.
"We do not have a good explanation or justification why we see this level of prices," Al Yabhouni told reporters on the sidelines of an energy conference in Dubai.
The price should be at a level where "it could be digested" by consumers, he added.
The UAE is prepared to produce more oil to meet its "commitment and responsibilities" as a producer, but it does not see customers for increasing the output.
"You need customers. Our customers are satisfied with what they are getting and that means the market is satisfied," Al Yabhouni said, adding that "obviously there is more supply than demand".
According to the Organisation of Petroleum Exporting Countries (Opec), oil production exceeded demand by 800,000 barrels per day (bpd) to one million bpd in the second quarter.
However, the Paris-based International Energy Agency (IEA), which advises 27 industrialised countries on energy policy, does not see any significant drop in oil prices in the coming few months.
"Looking at the fundamentals and other conditions in the market, I would be surprised if the current price levels go substantially downwards in the months to come. We still expect the demand to be strong," IEA chief econ-omist Fatih Birol said.
US investment bank Goldman Sachs has predicted that oil prices could reach $200 per barrel amid continuous high global demand for oil.
Birol said such predictions are "very unfortunate" and do not help the market to stabilise.
While asserting that the market is well supplied, Opec has blamed speculators in the crude futures market for driving prices to record levels.
Comment: IEA calls to end subsidies
The IEA has urged an end to fuel subsidies provided by countries in the region and elsewhere.
Chief economist Fatih Birol said these subsidies will "change" consumer behaviour and will help to reduce the rise in global crude demand.
In the last two to three years more than 80 per cent of crude demand growth came from the Middle East, China and India, he said.
He said these places need to let market forces determine the retail price of oil.
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