"OPEC can do nothing"

Is the rubber hitting the road on world oil supply/demand balance?

OPEC managed to calm markets back in early June as Saudi Oil Minister Ali Naimi then told reporters, "We have decided to lift the ceiling to 25.5 (million barrels a day) effective July 1 and 26.0 (million barrels a day) effective Aug. 1 and we will meet to review future action on July 21 in Vienna".

Also in early June, Iranian Oil Minister Bijan Namdar Zangeneh was quoted, "We believe there is not any shortage in the market and we should be very careful about the coming months".

But yesterday another OPEC Minister, Indonesia's Purnomo Yusgiantoro, who is also OPEC's president, said, "The oil price is very high, it's crazy. There is no additional supply".

The same CNN story also refers to a Monday quote from Algerian Oil Minister Chakib Khelil,

the Organization of the Petroleum Exporting Countries had done all it could to stop this year's oil price rally. "OPEC can do nothing," Khelil told reporters in Algiers.

International oil prices have surged more than one-third since the end of 2003 as global demand has accelerated with robust economic growth, stretching world production almost to its limits.

Today, it's "Another day, another oil record", according to an early-day CNN story. But by the afternoon, stories started to contain calming language: Oil Slips from Record Highs.

I suspect that this story, "The death of cheap crude" on english.aljazeera.net sums up the truth of the situation:

As prices hit record highs, some analysts' remarks, and much of the comment in the media, are directed at uncertainty surrounding Russian company Yukos, Iraqi pipeline attacks, Nigerian strikes and a forthcoming presidential referendum in Venezuela.

Yet behind the easy headlines, so called emerging economies such as China and India, added to rising American demand, are putting pressure on the price of energy. Meanwhile, major oil fields are withering, no new ones are being found and supplier countries are already pumping at their production limits....

Ali Bakhtiari, head of strategic planning at the Iranian National Oil Company (NIOC), dismisses the media chat, as just that.

"Cheap oil is dead. You are never going to see oil priced at $25 a barrel again. These high prices, yes, they are exacerbated by Yukos, Iraq and so on, but more importantly they are a sign that we have major structural problems with supply", [Bakhtiari said].

I expect prices to ease into the fall ahead of the election. If that does not happen, then it's really clear that the oil markets are beyond any significant influence of President Bush and his friend Saudi ambassador Prince Bandar bin Sultan.