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Old 09-14-2007, 09:22 AM   #458
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OPEC chief says 80-dollar oil won't last

OPEC chief Abdalla Salem El-Badri said Friday the current oil price of 80 dollars did not reflect fundamentals and was unlikely to last long.

"I don't think 80 dollars (per barrel) will last," El-Badri told journalists here. "The fundamentals do not support the price."

El-Badri said that the current price of oil was "too high."

But OPEC did not have a target for the oil price, he said.

"We're not in favour a high price or in favour of a low price," the cartel chief said.

The price of oil surged to record highs this week even after the Organisation of Petroleum Exporting Countries announced it would pump an extra 500,000 barrels per day from the start of November as a signal of the cartel's willingness to respond to supply fears in consumer countries.

One-off factors such as the hurricane season were behind that, El-Badri argued.

But still the cartel was scratching its head over the exact reasons.

"We're all asking ourselves why. Perhaps you (the markets) know something we don't."

Asked whether OPEC at its next meeting in December would discuss further raising output if the oil price persisted at current levels, El-Badri was tight-lipped.

"Of course, we will discuss supply, demand and inventories, as usual," he said.

"We don't enjoy seeing a very high price."

In its monthly report, released on Friday, OPEC maintained its estimate for world oil demand growth in 2007 despite current economic problems.

"World oil demand growth for 2007 is forecast at 1.3 million barrels per day (bpd) or 1.5 percent, broadly unchanged from the last" report in August, the September report said.

The Vienna-based OPEC said it was taking into account "the current world oil demand growth in the third quarter, along with the anticipation of a normal winter in the fourth quarter" in the northern hemisphere.

The Paris-based International Energy Agency had on Wednesday lowered its predictions of global oil demand for both this year and next and warned that financial markets turbulence could force it to again revise its forecast.

The IEA, which acts as energy policy advisor to industrialised countries, reduced its demand forecast to 85.9 million barrels per day in 2007 and 88 million bpd in 2008 from its prediction last month of 86 and 88.2 million bpd respectively.

"Mild weather and interfuel substitution have contributed to the fall in demand," it said in its latest monthly report. "Looking ahead, continued high prices may further dent demand."

But OPEC said that "world economic growth remains unchanged for 2007 and 2008 at five percent this month."

The oil cartel said "it is expected that the fallout from financial market turmoil will impact US and world economic growth in the second half of 2007 and 2008, although it is still too early to gauge the size of the effect."

"In credit markets, confidence is far from reestablished," the report said.

"Much will depend on monetary accomodation to ease the strains produced by the higher cost of capital and tighter credit availability," OPEC said, adding that "all eyes are now on the Fed meeting on September 18, when it is generally expected that interest rates will be lowered by 25 points."

It said there were signs of economic weakness in Japan and the eurozone while China's growth was high but so was inflation "mainly due to high food prices, calling for further monetary tightening."

OPEC said meanwhile that "the demand for OPEC crude in 2007 is expected to average 31.0 million bpd, an increase of 0.1 million bpd over the previous year."

"In 2008, the demand for OPEC crude is expected to average 30.8 million bpd, a decrease of 216,000 bpd," OPEC said.
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