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OPEC Secretary-General Expresses Concern Over Rising Oil Prices - 2004-05-13

A day after crude oil prices rose to record levels in New York trading, the Organization of the Petroleum Exporting Countries is trying to talk the price down. Indonesia's oil minister is the current secretary general of OPEC, and on Thursday he spoke to Tim Johnston in Jakarta.

Crude oil hit $40.77 a barrel on Wednesday, its highest levels since just before the first Gulf War 13 years ago. The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world's exported oil, says it is deeply concerned.

OPEC's secretary general, Indonesia's Minister for Energy and Mineral Resources Purnomo Yusgiantoro, says members are worried enough to meet in Amsterdam next week. That is nearly three weeks before their regularly scheduled meeting in Beirut on June 3.

"Everybody in OPEC is already concerned with high oil prices and they will do as much as they can to bring the price down, and to bring the price down, one of the OPEC policies that can contribute to this thing is to increase the quota," he said.

Many analysts think the high prices are the result of limited supplies. However, Mr. Yusgiantoro says they are the result of factors outside its control, including violence in Iraq and growing global demand.

"The main problem with the recent high prices is closely linked to geopolitical uncertainties, inadequate refining capacity in the USA to cope with rising demand, multiple specifications for gasoline by different states, heavy speculation on oil by investment funds and speculators," he said.

OPEC cut its export quota to 23.5 million barrels a day on April 1, a move observers say contributed to a global impression of limited supplies. Mr. Yusgiantoro says that actual production is about 25.5 million barrels a day.

Saudi Arabia, the only OPEC member with significant extra pumping capacity, has suggested increasing quotas by one and a half million barrels a day. The secretary general says no firm decision has been made on that idea.

The International Energy Agency warned Wednesday that demand for oil is still growing and unless supply increases, the nascent global economic recovery could be strangled. The IEA pointed the finger at OPEC's production levels.

Asian markets have seen share prices tumble this week because of concerns that high oil prices will cut profits for airlines, shipping companies and manufacturers.

The latest price for the OPEC reference basket of seven crude oils stood at $35.57 a barrel, significantly above the group's target range of between $22 and $28 a barrel.

Mr. Yusgiantoro said that although OPEC wants to reduce prices, it might also lift the price band, which was last altered four years ago.

"OPEC is still using $22 to $28 a barrel as a price band, however the secretariat of OPEC is now studying carefully to see the effect of dollar depreciation and inflation for the real price of oil," he said.

With no sign that demand will slacken soon, analysts say oil prices are likely to remain high for some time. The United States and Europe are moving into the peak holiday travel period, while India and China soak up more oil to fuel their economic growth.