Opec expects stock to keep increasing

Opec expects stock to keep increasing
Bloomberg Published: February 28, 2008, 00:39

Dubai: Oil supply and demand are in balance, and a gradual rise in stockpiles will continue through the second quarter, a Gulf official familiar with Saudi Arabian oil policy said yesterday.

The oil price, which reached a record $102.08 a barrel in New York electronic trading yesterday morning, is higher than it should be and isn't in line with supply and demand fundamentals, the official said in an interview on condition of anonymity.

Saudi Arabia is the largest influential producer within the Organisation of Petroleum Exporting Countries, scheduled to meet on March 5. "Opec is taking a cautious view of the supply and demand balance," said Paul Horsnell, head of commodities research at Barclays Capital in London. "But it seems hard to justify a cut in production, even based on their numbers."

Futures jumped in New York as the dollar fell to an all-time low against the euro. The UBS Bloomberg Constant Maturity Commodity Index rose to the highest ever, on gains for gold, silver, sugar, copper and coffee.

The dollar weakened to $1.5088 a euro, the lowest since the European single currency was introduced in 1999. Oil traded 38 cents higher at $101.26 at 11.54am London time.

Opec will consider all available supply, demand and inventory levels when it meets next week in Vienna, and recommendations from the group's secretariat, the official said.

Position: Group firm on stand

A combination of economic slowdown in the US and a seasonal fall in consumption will hit oil demand and Opec will not increase output when it meets next week, the producer group's president said on Tuesday.

"I can tell you they are not going to increase production because there are plenty of stocks," Opec president Chakib Khelil told Reuters in the Nigerian capital of Abuja.