Oil soars to record, dollar hits
low after OPEC accuses U.S. of 'mismanagement'
By William J. Kole
The Associated Press
06/03/08 -- - VIENNA, Austria 05/03/08 -- OPEC said today it will not put
more oil on the global market despite record-high prices for
crude, blaming the U.S. for economic "mismanagement" that it
said was having a worldwide effect.
Oil soared past $104 for the first time after the OPEC
announcement and the release of a government report showing a
surprise drop in crude-oil stockpiles.
Light, sweet crude for April delivery jumped $5 to settle at a
record $104.52 a barrel on the New York Mercantile Exchange
after earlier rising to $104.64, a new trading record. Earlier
this week, oil prices broke the previous inflation-adjusted
price record of $103.76, set in 1980 during the Iran hostage
The U.S. dollar sunk to record lows today, with the euro
fetching $1.53 for the first time ever in Europe.
The 13-nation Organization of Petroleum Exporting Countries said
it would maintain current production levels because crude
supplies are plentiful and demand is expected to weaken in the
OPEC President Chakib Khelil told reporters the global market is
being affected by what he called "the mismanagement of the U.S.
economy," and that America's problems were a key factor in the
cartel's decision to hold off on any action.
"If the prices are high, definitely they are not due to a lack
of crude. They are due to what's happening in the U.S.," Khelil
said. "There is sufficient supply. There's plenty of oil there."
Khelil's comments came a day after President Bush lashed out at
OPEC did pledge to maintain "constant vigilance" over the
Khelil said he and OPEC's secretary-general were authorized to
call an extraordinary meeting or hold phone consultations "at
any time, depending on the pressures on the market" — an
apparent gesture to ease global economic jitters.
There had been some speculation that OPEC might actually cut
production — a move that would drive prices even higher, along
with profits for cartel members — but Khelil said a cut was not
discussed at today's meeting. He said OPEC had no plans to meet
again before its next scheduled conference in September.
Earlier in the week, price hawks Venezuela and Iran had
indicated they planned to push for less production.
On Tuesday, OPEC was rebuked by Bush. "Understand the
consequences of high energy prices," Bush said after meeting
with King Abdullah II of Jordan in the Oval Office. "I think
it's a mistake to have your biggest customers' economies slowing
down as a result of higher energy prices," he added.
Khelil said crude stocks were well within their five-year
average and the 13-nation group was not inclined to either boost
or reduce its current output of about 32 million barrels a day.
OPEC satisfies roughly 40 percent of the world's demand for
OPEC said it "highlighted the economic slowdown in the U.S.,
which, together with the deepening credit crisis in financial
markets, is increasing the downside risks for world economic
growth and consequently demand for crude oil."
Analysts had not expected any significant action today.
"In truth, OPEC's decision not to pump more oil is a reflection
that supply is relatively good," said Anthony Sabino, a
professor of business at St. John's University in New York.
"What is driving oil prices up to the stratospheric level of
over $100 per barrel is the U.S. economy, now undeniably in
recession," he said. "It's not so much the price of oil is going
up — it's that the value of the U.S. dollar, sad to say, is
Oil shot up a dramatic 19 percent last month as the falling
dollar prompted speculators and other investors to shift cash to
crude and other commodities as a hedge.
Among other reasons for the spike: tensions in the oil-rich
Middle East and Turkey's incursion into northern Iraq.
Key cartel members said this week that prices in the $85 to $90
a barrel range would be optimal.
"The market listens to what they say. So when they do nothing,
in the short-term there are still fears," said John Hall, of
John Hall Associates in London.
OPEC, Hall said, is "very, very nervous at the moment. By
helping the price to rise, they have fueled inflation and
they're fueling recession."
But Stephen Schork, editor of The Schork Report, which keeps
tabs on global energy markets and trends, said the cartel may
not have had much choice.
"If you're OPEC, you see ample supplies and questionable
demand," he said.
Schork gave OPEC credit for not pushing through a cut in output,
which "would legitimize the bullish speculation we've seen since
February" and risk sending oil to $120 a barrel or higher.
The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia,
Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United
Arab Emirates and Venezuela. Iraq is the only member not subject
to the cartel's output quotas.
Copyright © 2008 The Seattle Times Company
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