OPEC Statement Casts Doubt Over Future of Supply Shortage

By Stewart Douglas

The price of oil fell dramatically today following comments made by OPEC yesterday.

The comments made by an OPEC representative showed the organisation had taken into consideration the impact of supply on the current record oil prices, causing over a dollar to be wiped from its value per barrel.

OPEC, the cartel responsible for 40% of the world’s oil production, spoke publicly about the impact of the rising cost of oil in economic terms.

OPEC chairman Mohammed al-Hamili has publicly shared his concern as to the rising price of oil, and the resultant impact of this on world economies.

The OPEC chairman is quoted as having expressed ‘concern’, citing the possibility of a worldwide recession as his major fear.  This news has increased speculation of an impending supply increase when OPEC meet later this year.

With increasing demand in emerging Asian economies for oil, it is feared that prices could continue to rise to crippling levels, which would inevitably have a drastic effect on most Western economies, i addition to emerging markets in the East.

However, OPEC has yet to announced any supply increase to flood the market and create more favourable pricing for crude oil, after consecutive supply cutbacks at their recent meetings.

The news comes with oil prices reaching $78.40 a barrel last week in London - a mere $0.25 off the August 2006 record high.

Mohammed al-Hamili, when asked about the potential for an increase in production, stated that this remained undecided, and the official OPEC line still refuses to acknowledge supply as a factor in recent high prices, despite the feelings of many economic analysts.

It is thought that a supply increase is a likely proposition for the next OPEC meeting in September, which sees the world’s major oil exporting nations come together to regulate the price and supply of oil.