Cartel won’t be able to make up lost output, says its head
VIENNA) The head of the Organization of the Petroleum Exporting Countries (Opec) warned on Thursday that oil prices would experience an ‘unlimited’ increase in the event of a military conflict involving Iran because the group’s members would be unable to make up the lost production.
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Unlimited rise in oil price in case of Iran war: Opec
Cartel won’t be able to make up lost output, says its head
(VIENNA) The head of the Organization of the Petroleum Exporting Countries (Opec) warned on Thursday that oil prices would experience an ‘unlimited’ increase in the event of a military conflict involving Iran because the group’s members would be unable to make up the lost production.
‘We really cannot replace Iran’s production - it’s not feasible to replace it,’ Abdalla Salem el-Badri, the Opec secretary-general, said in an interview.
Iran, the second-largest producing country in Opec after Saudi Arabia, produces about four million barrels of oil a day out of the daily worldwide production of close to 87 million barrels.
The country has been locked in a long dispute with Western nations over its nuclear ambitions.
In recent weeks, the price of oil has risen higher on speculation that Israel could be preparing an attack on the country’s nuclear facilities. The sabre rattling intensified this week with missile tests by Iran.
That has further unnerved oil markets because of concerns that any conflict with Iran could disrupt oil shipments from the gulf.
In New York, crude oil climbed US$5.60, to US$141.65 a barrel.
‘The prices would go unlimited,’ Mr Badri said during the interview, referring to the effect of a military conflict. ‘I can’t give you a number.’
Iran has insisted that its nuclear programme is for purely peaceful purposes.
Mr Badri, a former oil executive who has headed the oil industry in Libya and served as deputy prime minister of that country, called for a peaceful solution, and he hinted that an additional conflict in the Middle East besides the continuing conflict in Iraq would be severe and long-lasting.
‘If something happened there, nobody would be able to solve it,’ he said, referring to a war involving Iran.
He said that current geopolitical tensions were among the main reasons for the high price of oil. He said that a shortfall in refining capacity and a weak dollar were other factors, but he reiterated Opec’s position that speculation on oil markets probably was the most important one.
He insisted that reserves of oil were plentiful and that worries about scarcity were misplaced.
Supplies from Russia and Norway and other nations outside the 13-member Opec will keep growing, helped by technologies like turning gas and coal into liquid fuel and extracting oil from tar sands and shale, he said.
Even so, he also sought to assuage concerns about a supply shock, saying that Opec members, which contribute about 40 per cent of daily worldwide production, were already investing US$160 billion in new production capacity up to 2012.
But he said additional investment in future capacity could be frozen, potentially sharpening a dispute with consuming nations about whether sufficient steps were being taken to meet demand over the next decade.
Steps by the European Union and in the United States to cut dependence on fossil fuels meant that Opec had no alternative but to take a cautious approach before going ahead with plans to invest up to US$540 billion in oil production up to 2020.
‘If we don’t see the demand, we are not going to invest,’ said Mr Badri, adding that there was real doubt over what amount of money Opec members would invest after 2012.
Opec members ‘don’t want to spend their money on something they cannot use’, he said. -- NYT
Foreign Direct Investment in China Jumps 45.6 Percent
By Li Yanping and Nipa Piboontanasawat
July 11 (Bloomberg) -- Foreign direct investment in China rose 45.6 percent in the first half from a year earlier, swelling inflows of cash that may stoke inflation in the world's fastest-growing major economy.
Spending by overseas companies increased to $52.4 billion, the Ministry of Commerce said today on its Web site.
China is adding controls to try to stem inflows of speculative capital from investors attracted by a strengthening yuan and interest rates at a decade high. So-called hot money inflows may have reached more than $200 billion in the first five months of this year, according to Michael Pettis, a finance professor at Peking University.
``Foreign direct investment has been one of the major channels for hot money since the beginning of 2007,'' said Shi Lei, an analyst at Bank of China Ltd. in Beijing. ``Speculators can always find a way to circumvent government rules.''
Besides the risk of stoking inflation that reached a 12- year high in February, hot money puts the nation at risk of ``massive outflows'' if expectations for currency gains reverse, according to a central bank report last month.
The yuan has gained 6.9 percent versus the dollar this year and 21 percent since a fixed exchange rate was scrapped in 2005. The key one-year lending rate is 7.47 percent, and the deposit rate is 4.14 percent.
Trade Surplus
The cash from foreign direct investment adds to the $21.4 billion pumped into the economy last month by the trade surplus.
China's foreign-exchange reserves, the world's largest, surged 40 percent to a record $1.68 trillion in March from a year earlier, according to the latest official data. The increase through June may be announced as early as today.
``As long as the yuan continues to appreciate and the economy outperforms other countries, China will remain an attractive destination for funds,'' said Zhu Baoliang, chief economist at State Information Center in Beijing, an affiliate of China's top economic planning agency.
The government is adding measures to try to stop investors from circumventing capital controls.
The State Administration of Foreign Exchange said last week that it will inspect exporters' foreign-exchange settlements from July 14 to try to prevent sham transactions that let hot money in.
China is also drafting regulations to control cross-border payments for services, with the same aim, according to an official at the regulator, who wouldn't be identified.
Oil demand and supply will soar: OPEC
July 10, 2008
Cartel blames speculators and weak U.S. dollar for recent price runup.
VIENNA (AP) -- World energy needs will spike by more than 50% by 2030 but adequate oil reserves, conservation and new methods of recovery mean supply will keep pace with demand, the Organization of Petroleum Exporting Countries said Thursday.
In its "World Look Outlook for 2008," OPEC also took issue with critics blaming present skyrocketing prices on the refusal of the organization to increase output, asserting that the weak U.S. dollar and market speculators were at least partly to blame.
And it suggested that decades of low prices led to under-investment, leaving the industry ill-prepared to sate the increased hunger for crude generated by strong economic growth.
Past "low prices were bad for the oil industry, and in the longer term they were also bad for consumer," said the summary of the 214-page report. At the same time, despite delivery bottlenecks, "there is enough oil to meet the world's needs for the foreseeable future," it added.
OPEC Secretary-General Abdalla Salem El-Badri made the same point, in his foreword.
"Today, what is apparent is that oil supply and demand fundamentals are healthy," he wrote. "There is, and has been, more than enough supply to meet demand, and oil stocks in major consuming countries are at comfortable levels. This should point away from the direction of current price levels."
The report projected oil demand to rise by 29 million barrels a day from 2006 through 2030 to reach a daily 113 million barrels a day - a drop of 4 million barrels a day over its predictions last year, "due in part to the higher oil price assumption" - expectations that pricey petroleum is here to stay.
New recovery methods to boost supply
A large part of that projected demand will be met by new recovery and production procedures, meaning total demand for "conventional crude" - oil pumped from wells and other methods using present day technology - will not exceed 82 million barrels a day by 2030, said OPEC.
In comparison OPEC last month said it expects oil consumption this year to amount to an average of 86.9 million barrels per day.
"Oil has been in the leading position in supplying the world's growing energy needs for the past four decades, and there is a clear expectation that this will continue," said the report, estimating that crude and other fossil fuels will make up 85% of the world's energy mix in 2030. "Gas is expected to grow at fast rates, while coal retains its importance in the energy mix."
The generally optimistic tone of the report contrasted sharply with forecasts published last week by the International Energy Agency.
That report by the energy watchdog of the world's top industrialized nations predicted that oil supplies will remain tight at least for the next five years, despite record prices that have reduced demand. And IEA Executive Director Nobuo Tanaka said the world was in the grip of an "oil shock," similar to once in the 1970s and then the 1980s - but with no simple fix this time.
In its monthly forecast Thursday, the IEA slightly raised its forecast for global oil demand this year and said growth would continue in 2009 thanks to demand in developing countries.
The report came as the benchmark contract for crude was trading at above $136 a barrel but about 6.4% below last week's record high.
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