OPEC to Ensure Adequate Crude Oil Supply, Khelil Says

By Leony Aurora

July 29 (Bloomberg) -- OPEC President Chakib Khelil said crude oil prices are ``abnormal'' and the producer group shouldn't cut output as it needs to ensure adequate supply.

``The oil price is too high, everybody agrees on this,'' Khelil, who is also Algeria's oil minister, told reporters in Jakarta today. This benefits neither producers nor consumers, he said.

Oil surged to a record $147.27 a barrel in New York on July 11 as a weaker dollar prompted investors to switch to commodities as a hedge against inflation and Iran's nuclear program raised concern Middle East supply may be disrupted. Crude has fallen 15 percent since then on speculation high prices may cut fuel demand.

``The current price isn't connected at all to supply and demand because we cannot explain changes of $20 in one day or two days only due to supply and demand,'' Khelil said. ``Supply and demand doesn't change in one day.''

Asked whether OPEC members should cut output, Khelil said, ``no, I don't think so. They always want to make sure there's good supply and demand, and to satisfy the demand.''

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, meets in Vienna on Sept. 9 to review output after maintaining levels at its past three meetings in December, February and March.

Crude oil for September delivery rose as much as 86 cents or 0.7 percent, to $125.59 a barrel on the New York Mercantile Exchange today.

If the dollar strengthens and the political situation improves, then the long-term oil price will be about $70 to $80 a barrel, Khelil said.

Increase Output

Libya's top oil official said yesterday that oil prices slipped from a record as concern over an escalation of tensions between the U.S. and Iran eased.

``Probably it's about geopolitics, the U.S. and Iran,'' Shokri Ghanem, the head of Libya's National Oil Corp., said in a telephone interview from Tripoli. ``Oil prices will go up again because of speculation.''

OPEC's 13 members will increase production by 200,000 barrels a day, or 0.6 percent, to 32.9 million barrels a day this month compared with June, according to estimates by industry consultant, PetroLogistics Ltd.

Saudi Arabia, the world's largest oil exporter, pledged on June 22 to increase output by 200,000 barrels a day in July, on top of a previous 300,000 barrel-a-day boost scheduled for June.

Iran's Oil Minister Gholamhossein Nozari was cited as saying by the state-run Shana news agency on July 22 that OPEC shouldn't raise output when it meets in Vienna.

OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

To contact the reporter on this story: Leony Aurora in Jakarta at laurora@bloomberg.net