Building a world of
resilient communities.



Oil Hits $40, Doubts OPEC Can Fix Supply

NEW YORK/LONDON (Reuters) - Oil prices bounced back to 13-year peaks above $40 on Tuesday on doubts that top world exporter Saudi Arabia's call for a rise in OPEC quotas would add much actual supply to a tight international market. U.S. light crude gained $1.17 to trade as high as $40.10 a barrel, the highest level since October 1990 after Iraq invaded Kuwait. London Brent crude was up over a dollar to $37.40 a barrel.

Saudi Arabia triggered a dollar slump in prices on Monday by proposing that the OPEC cartel raise official production limits by at least 1.5 million barrels per day (bpd) when ministers meet on June 3 to review policy.

Saudi Oil Minister Ali al-Naimi said the increase was necessary to cool sizzling oil prices that threatened to dent global economic growth. The cost of crude has jumped roughly 20 percent this year.

OPEC has come under strong pressure from major importing nations to bring down oil prices.

The International Energy Agency, which advises 26 industrialized nations on energy policy, welcomed the Saudi proposal but said the move was not enough to bring down runaway oil prices.

"I don't think it will be enough as it will be a long process to cool the market, but it's a first step and I am happy with this step," IEA Executive Director Claude Mandil told a news conference.

OPEC is already pumping some two million bpd above its formal 23.5 million bpd output ceiling and the IEA's Mandil questioned whether an increase in formal quotas would actually translate into higher supply.

Algerian Energy Minister Chakib Khelil said on Tuesday that Saudi Arabia is the only OPEC producer with the spare production capacity to implement the proposed increase in output quotas.

"The proposal for a 1.5 million bpd quota increase would only add about 500,000 bpd of production -- which overheated markets could use," said Adam Sieminski of Deutsche Bank.

Strong demand in China, low U.S. fuel supplies and an escalation of violence in the oil-rich Middle East have fueled oil's price rise.

Oil analysts have raised their 2004 crude price projections by more than 10 percent in the last two months, as they try to keep pace with oil's relentless upward surge, a Reuters poll showed on Tuesday.

A survey of 14 analysts forecast the average price of benchmark Brent crude at $29.94 per barrel, up from a projection in a March poll of $27.13 and above an average last year of $28.48 a barrel.

The poll predicted an average price for U.S. light crude this year of $32.72 a barrel, up from last year's average $30.99 on the New York Mercantile Exchange.

Iraqi crude exports were disrupted at the weekend by sabotage to a pipeline carrying oil to the key loading terminal at Basra, target of failed suicide bomb attacks two weeks ago.

Iraqi Oil Minister Ibrahim Bahr al-Uloum said the sabotage cut Iraq's exports from its Basra terminal in the south to 1.1 million barrels per day.

Exports from the terminal were expected to be restored to normal within 24 hours. Before the sabotage, Iraq was exporting 1.6 million bpd from the Basra Terminal, which is about 10 km (six miles) offshore.

What do you think? Leave a comment below.

Sign up for regular Resilience bulletins direct to your email.

Take action!  

Start your own projects. See our RESOURCES page.
Make connections via our GROUPS page.
Help build resilience. DONATE NOW.


This is a community site and the discussion is moderated. The rules in brief: no personal abuse and no climate denial. Complete Guidelines.


IEA report: US shale oil growth practically zero in 2017

US growth is seen to decline to a meagre 160 kb/d by 2017. That is plausible …

Richard Heinberg on Our Renewable Future

Richard Heinberg discusses our renewable future and how to get there.

Peak Oil Review - Mar 2

A weekly roundup of peak oil news, including: -Oil and the global economy …

Oil Prices Don’t Change Because of Rig Count

Oil prices don’t change based on weekly rig count reports. Yet every …

Energy policy - Mar 1

Syriza: another energy is possible / Renewable energy grab in the Sahara? / …

The Great Game in the Holy Land

Guess what? Almost all the current wars, uprisings, and other conflicts in …

North Dakota Considers Weakening Standards on Radioactive Drilling Waste as Oil Prices Collapse

As the collapse of oil prices threatens North Dakota's shale drilling rush, …