|
the same
time, like to thank his predecessor, His
Excellency Sheikh Ahmad Fahad Al-Ahmad
Al-Sabah, for his excellent contribution
to the affairs of the Organization,
especially during his period as
President of the Conference in 2005, and
to wish him well for the future.
Before we move onto market matters, let
me recall the warm hospitality extended
to the OPEC Conference by the Government
and people of Lebanon in June 2004, as
well as the excellent arrangements they
made for our 131st Extraordinary
Meeting. We can do no less than to
express our deepest sadness over the
devastation that has been sustained by
them in the past two months, just when
that nation was finally getting back on
its feet after the protracted
hostilities of the past. I know that I
am speaking on behalf of the entire OPEC
family when I say that our thoughts and
prayers are with those in Lebanon and
all others who have been innocent
victims of these hostilities, as they
grieve for their loved ones and begin
once again to reconstruct their
shattered lives.
Since the last OPEC Conference in
Caracas on 1 June, oil prices have
reached new record highs, exceeding US
$70 a barrel for OPEC's Reference
Basket, although we are pleased to see
that they have softened considerably
again recently. This high price trend
has persisted against an international
oil market that remains well-supplied
with crude and has commercial stocks at
very high levels, in absolute volumes
and days of forward cover.
The specific reasons for the recent
price peaks were the outbreak of
hostilities in Lebanon in the middle of
July and fears of hurricanes in the US
Gulf closely followed by the sudden
shutting-down of the Prudhoe Bay field
in Alaska in the first half of August.
However, this must be set against the
backdrop of volatility that has
prevailed in the market for the past two
and half years, due principally to
concern over the lack of effective
global oil refining capacity, anxiety
about the ability of oil producers to
meet anticipated future oil demand,
geopolitical developments in some
producing countries and speculation in
the oil futures markets.
It is of particular interest to note
that the relationship between crude
prices and product prices appears to
have diverged recently, with gasoline
prices exhibiting greater volatility
than crude. Between the end of 2004 and
July this year, West Texas Intermediate
prices rose by $26/b, or about 50
percent, compared with the much higher
$46/b, or 90 percent, for US gasoline
prices in the same period.
Crude oil volatility appears to have
subsided over the past year, due to
ample supply, rising OPEC spare
capacity, plentiful strategic reserves
and abundant commercial crude
inventories, which are now at their
highest levels since 1998. On the other
hand, the increasing volatility of
gasoline can be attributed, for example,
to higher demand, increasingly stringent
product specifications and, more
recently, the issue of the adequacy of
ethanol supplies. In particular, the
relatively low level of gasoline
inventories, in terms of days of forward
cover, coupled with the lack of spare
refinery capacity, has left an
uncomfortably thin cushion of spare
supply. Hence, the growing volatility
reflects an increased sensitivity to
developments in the product markets,
such as unexpected outages or even
planned refinery shutdowns. |
