Kuwait Times

Published Date: November 17, 2007

RIYADH: Leaders of the Organization of Petroleum Exporting Countries meeting this weekend in the Saudi capital are likely to discuss the possibility of creating a currency basket to price their crude, Venezuela's oil minister said yesterday. Rafael Ramirez, the minister, said the issue will come up at a closed session in the two-day OPEC summit, Dow Jones Newswires reported.

The issue of the currency basket ... they will have an opportunity to discuss this in the closed session," Ramirez told reporters on the sidelines of the OPEC gathering.

A currency basket could be used as a way for the cartel to shield crude oil exports, which are priced in US dollars, from the dollar's decline against other major currencies. OPEC supplies about four out of every 10 barrels on world oil markets.

The cartel's leaders in Riyadh on Saturday and Sunday are to discuss the challenges a potential global recession, an anemic dollar, and rising environmental concerns present to their near-$1.8 billion a day in revenue. Ecuador, with its half-a-million barrels a day of production, may also be formally welcomed back to the group this weekend.

The Dow Jones Newswires also reported that a statement at the end of the two-day gathering may include a communique on the dollar and its impact on oil prices. Some OPEC members have voiced concern about the dollar, in which their prime export product is priced, and are to call for studies to be conducted into the effects. Proposals by both Venezuela and Iran to trade with oil in a basket of currencies in order to replace the historical link to the dollar have been put forward, but such calls haven't fou
nd enough support from some in OPEC. The group's Secretary General Abdalla Salem el-Badri said earlier this week that the group wasn't discussing changing the pricing of crude oil from dollars into other currencies.

The OPEC Secretariat isn't working on this issue, because it's up to member countries to decide for themselves," el-Badri said.

Meanwhile, oil prices rose yesterday amid expectations that global crude supplies will remain tight, despite a US oil inventory report that showed a surprising build in domestic crude stockpiles.

Light, sweet crude for December delivery rose 70 cents to $94.13 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract expires at the end of Friday. It fell 66 cents to settle at $93.43 a barrel overnight.

In London, January Brent crude futures added 56 cents to $90.79 a barrel on the ICE Futures exchange. "The outlook for pricing remains strong based on tight supply-demand fundamentals," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Because of growth in developing countries, global oil demand growth is going to continue at a good pace." A US government report said Thursday that crude oil inventories rose by 2.8 million barrels last week. Analysts surveyed by Dow Jones Newswires, on
average, had expected a decline of 300,000 barrels.

The higher inventories were "largely the result of a 830,000 barrel per day increase in imports," said Vienna's PVM Oil Associates.

Olivier Jakob of Switzerland's Petromatrix said the level of crude imports showed no "no strong impact from the Mexican weather disruptions" of weeks past. The US Energy Information Administration's report also said gasoline supplies rose by 700,000 barrels while inventories of distillates, which include heating oil and diesel fuel, fell by 2 million barrels. Nymex heating oil futures rose 2.39 cents to $2.5826 a gallon (3.8 liters) while gasoline prices added 0.98 cent to $2.3460 a gallon. Natural gas f
utures gained 6 cents to US$7.760 per 1,000 cubic feet.

Crude prices have been volatile this week, falling more than $3 on Tuesday and rising more than $2 on Wednesday after hitting a record of $98.62 a barrel last week. But some analysts say tight supplies and increasing demand will continue to drive prices higher.

What's really supportive of strong pricing is that global demand growth is still exceeding supply growth, and that has eaten into the commercial inventories of consuming nations," Shum said.

Currently, oil producers are turning out about 85 million barrels a day, while the US Department of Energy says consumption is between 85 million and 86 million barrels a day.

The Organization of Petroleum Exporting Countries has been under pressure to ease the supply tightness, with US Energy Secretary Samuel Bodman saying earlier this week that he asked OPEC to increase production. OPEC Secretary General Abdalla Salem el-Badri was quoted as saying in a report Thursday that the group was ready to increase oil production "if that will contribute to lower the (crude) price." The cartel also reduced its forecast for fourth-quarter demand for oil, saying it would rise 1.97 percen
t, down from expectations of a 2.1 percent increase a month ago. The revision was due in part to the effect high prices are having on demand.

Late winter in North America along with the high price of transport fuels appears to be reducing regional oil consumption in the fourth quarter, leading to a downward revision of (100,000) barrels a day for that quarter," OPEC said in its monthly oil market report. Shum noted that prices were also held up by the limits of OPEC's spare capacity, which left little cover for any supply disruptions, such as the oil pipeline attack in Nigeria reported Thursday that's expected to reduce production by 50,000 ba
rrels a day. The pipeline feeds one of Royal Dutch Shell PLC's two main oil export terminals in the nation's south.
Oil prices could quickly approach US$100 a barrel again if a future inventory report shows an unexpected decline in supplies, if new conflict develops in the Middle East or another oil producing region or if there's a late season hurricane or prolonged cold snap in the US. - Agencies