Top OPEC officials have reiterated that oil prices nearing $100 were not caused by a shortage of crude, and the group's chief disputed a report that Saudi Arabia had quietly opened its taps.
In comments likely to reinforce expectations that the producer group is disinclined to step up production for now, OPEC Secretary-General Abdullah al-Badri said he was "100 percent sure" there was no shortage in the oil market, and the UAE oil minister said it was "well supplied."
Badri said the near-record spread between U.S. oil futures and European Brent showed futures had become "disconnected" from the physical market; UAE's Mohammed al-Hamli blamed cold weather and trader buying for price gains.
Officials also revived a debate over output levels from top exporter Saudi Arabia, one of the few members with the capacity to quickly pump more oil. The issue is more than a statistical anomaly as traders are on high alert for any indication that OPEC will intervene to halt the price rally.
The International Energy Agency reported last week that the Kingdom was pumping more oil. The head of the IEA, the energy watchdog for the world's industrialized nations, stood by that report, which was at odds with Saudi customers and independent analysts who say they've seen no extra barrels.
"We think from what we learnt in our study there's a gap from what they report and what they produce. Is it intentional? I don't know. But we are simply saying that Saudi is producing more than they report," the IEA's Nobuo Tanaka told Reuters.
"Our wish is that OPEC is flexible and this is what we are seeing from (Saudi Oil Minister Ali) al-Naimi." Tanaka said, lauding the Saudis for the reported hike in output.
Asked where the extra Saudi production was going, Tanaka said demand was increasing in a number of countries including India, China and the United States. The IEA's monthly report showed Saudi output rising by 100,000 barrels per day (bpd) from a revised November figure of 8.5 million bpd, also well above most other estimates.
OPEC's leader disputed the report.
"According to information I receive from Saudi Arabia it is almost the same production as last month, so I don't see any increase in Saudi Arabia," al-Badri told Reuters Insider Television. "I don't know where the IEA got this number from but also the market reaction was negative."
Because no first-hand data exists, independent estimates of Saudi production are crucial -- not only for assessing opaque market fundamentals, but for gauging whether or not policymakers are prepared to act in the face of high prices.
TOEING THE LINE
OPEC officials also reiterated the view they've held since the group's last meeting in mid-December: that there's more than enough supply in the market, and that high prices alone are not going to force them into action.
"I'm sure 100 percent when looking at the markets there is no shortage in the market, there is plenty of oil in the market... When OPEC sees an imbalance in the market, OPEC will act to balance the market," Badri said.
"If you have a floating and commercial stocks for 60 days and we (at OPEC) are producing 29.3 million barrels per day how are you telling me there is a shortage?"
Al-Hamli added: "I still think the market is well supplied, and prices are driven by this cold weather and trader buying."
Asked if OPEC was likely to increase its production this year, he declined to comment.
OPEC is due to meet in June, and ministers from member states have said that there was no sign of an extraordinary meeting coming up, which al-Hamli agreed with.
"We are now just monitoring the market closely," he said.
Badri also weighed in on the debate around the reliability of the world's two main oil benchmarks, U.S. WTI crude and ICE Brent in Europe, which have moved to a near record gap of $12 a barrel this week as North Sea supplies tighten and a persistent glut hangs over the U.S. mid-continent.
"Brent is increasing not because of a shortage but because of technical problems... The price you are talking about is not the real price. The market got disconnected between the physical and price."
"It is not 100 dollars. Unfortunately this oil you are talking about -- WTI and Brent -- is in small quantities now, they are diminishing in the oil market," he added.
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