‘Financial mkts have fuelled oil price rally’

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Thursday , May 15, 2008 at 1223 hrs The rise in global oil prices in recent years has more to do with financial market volatility than fundamentals, Saudi Oil Minister Ali al-Naimi said on Thursday, according to the text of a prepared speech obtained by Reuters.

Naimi and other OPEC ministers have regularly blamed increased speculative trading, the weakening US dollar and other factors beyond their control for the rapid rise in oil prices, which have quadrupled in the past five years.

He also said Asia's oil consumption was expected to rise by 20 million barrels per day, driven by strong economic growth, and would account for 60 percent of the expected increase in global oil demand by 2030, according to his speech.

Naimi, the most influential voice in the Organisation of the Petroleum Exporting Countries, made no reference to current oil market conditions or prices in the speech.

The minister of the world's top oil exporter is in Seoul to receive an honorary degree from the Seoul National University.

"The short-term oil price gyrations seen in recent years are more closely tied to the internal logic of the financial markets than to underlying supply/demand fundamentals," Naimi said in his speech, due to be delivered later in the day.

Consumer nations have called on OPEC to ramp up production to help ease the sting of high fuel prices, but most members have resisted, saying that markets are well supplied and stocks ample.

US oil prices fell back below $124 a barrel on Thursday after Iran reassured markets it would not cut exports, US data showed a rise in distillate inventories and the US dollar held firm, but prices remain near Tuesday's record of near $127.

A lack of spare crude output capacity and tight refining capacity has helped fuel the six-year rally in oil prices, but Naimi said the supply outlook remained bright.

"The world economies today are more energy efficient than any time in history," he said. "From the perspective of oil and gas resource endowment, the picture is different from what the resource pessimists paint."