Oil Prices Fall Sharply As Bush Pressures OPEC

LONDON (AFP) – Oil prices extended losses Wednesday, falling sharply as US President George W. Bush pressured OPEC to increase crude output to help cut the cost of energy.

Responding to Bush’s remarks, OPEC Secretary General Abdullah al-Badri told AFP that high oil prices were not caused by a shortage of oil supplies and that other factors were to blame.

Stressing that the organisation saw no shortage, he said OPEC would be prepared to increase production if it saw evidence that supply and demand were out of balance.

Meanwhile Wednesday, the International Energy Agency kept its 2008 forecast for oil demand unchanged despite growing expectations of a recession in the United States which would be expected to curb demand.

New York’s main contract, light sweet crude for delivery in February, fell 1.14 dollars to 90.76 dollars per barrel ahead of the latest weekly snapshot of US energy inventories due out later in the day.

Brent North Sea crude for February fell as low as 89.75 dollars but then recovered to 90.18 dollars for a loss of 80 cents on the day.

“Sentiment amongst market participants has really dropped as it is looking more and more likely that the US is sliding into recession,” Sucden oil analyst Nimit Khamar said.

The United States is facing recession fears at home as the collapse of the housing market combines with high oil prices to make the economy a key issue in the campaign for the November presidential election.

Oil prices hit record highs above 100 dollars at the start of the year and despite the reverse since then the cost of energy remains a major concern, especially as its helps drive inflation higher.

President Bush meanwhile voiced hope that the Organisation of Petroleum Exporting Countries would increase oil output to combat high prices, after his talks with King Abdullah of Saudi Arabia, the world’s top crude producer.

“The president said there’s a hope that as a result of these conversations that OPEC would be encouraged to authorise an increase in production,” White House spokeswoman Dana Perino said on Wednesday after Bush arrived in Egypt from Riyadh on the latest leg of his Middle East tour.

“He’s worried about high oil prices and how they can negatively affect economies around the world,” Perino added. OPEC again insisted it was not responsible for the high cost of crude.

“Let me be clear, the high prices which we are witnessing are not because of any shortage of crude oil in the market,” the cartel’s chief Badri said in an email to AFP.

“OPEC is constantly monitoring the oil market and if at any time fundamentals justified such a move, the Organisation stands ready to raise production,” he said.

Badri added: “I would like to reiterate that this price trend is a consequence of persistent geopolitical tensions, the weakening of the US dollar, ongoing limitations and restraints in the US refining system and the increasing role of speculators in the oil market.”

Ministers from the 13-member cartel, which pumps about 40 percent of world crude, are to gather in Vienna on February 1 for a special policy-setting meeting.

Oil prices had already slumped on Tuesday after Bush urged producers to take action over “very high” prices. Bush’s comments prompted his Saudi hosts to say they would increase oil output when justified by the market.