Qatar: Oil market oversupplied but not wise to cut

ABS-CBN News

Posted at Jun 30 2008 07:41 AM | Updated as of Jun 30 2008 03:41 PM


Reuters


MADRID - Oil markets are oversupplied but it would not be wise for any OPEC exporter to tighten the taps given the risk of exacerbating prices, Qatari Oil Minister Abdullah al-Attiyah said on Sunday.

Attiyah's remarks came after Libya's most senior oil official said on Thursday he was studying the possibility of reducing output in response to a US threat to sue OPEC members, although he said the North African country had no concrete plans to do so for now.

"It is not wise today to cut supplies even though there is a surplus because we do not want to create a psychological problem," Attiyah told Reuters. "I'm not in favour of it at all. We want to try to help to ease the psychological heat."

But the Qatari minister criticised a move by US politicians to sue the Organization of the Oil Exporting Countries if the oil club did not pump an amount of oil that Washington sees sufficient.

"The Congress should look to increase exploration inside the United States," Attiyah said. "It is strange to ask what I should produce. It's an issue of sovereignty."

The US House of Representatives has passed a bill allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices.

The Senate has yet to vote on it and the White House has said it would veto the bill.

Attiyah said if enacted, the measure could create a problem for the US market as many producers would avoid US buyers.

"You will see a lot of oil suppliers will avoid the American market and you will create another big problem."

OPEC's biggest exporter Saudi Arabia has announced plans to hike output to 9.7 million barrels per day (bpd) -- the fastest pace in decades -- but some consumer economies blame the oil exporter group for doing too little to combat the rally.

Oil producers have to consider their reservoirs' productivity for the long run and not only supply and demand factors as they manage production levels, said Attiyah.

"Sometimes I have to think carefully in terms of reservoir management. I do not want to damage all the reservoirs. We produce to satisfy the whole world but not at the cost of our reserves," he said.

Record oil prices are putting pressure on the global economy, saddling companies and consumers around the world with higher energy costs and triggering protests from farmers in Spain to students in Nepal.

Attiyah said oil prices were detached from market fundamentals.

"There is no coordination between supplies and the oil price. We believe that the market is not facing any shortage of supplies at the moment. There are some cargoes in floating storage. More crude will not benefit the market.

"I never get a call from my customers asking for more supply but we always hear concerns about high oil prices. This shows there is no correlation between the oil price and supplies."