Supply fear adds $7 to oil prices

Vienna, Jul 30 | Updated: Jul 31 2007, 05:04am hrs
Current oil prices are inflated by around $7 per barrel because of concerns about supply security, Opecs secretary-general Abdullah al-Badri said on Monday. I presume that prices are currently around $7 per barrel above the real market value, Badri was quoted as saying when asked by how much supply concerns were pushing up prices.

However, Badri said Western concerns, about possible production bottlenecks due to political instability in oil-producing countries, were overdone and Opec had scope to increase production if necessary.

There are such concerns, but in our view they are exaggerated, he told WirtschaftsBlatt. There is much talk about production bottlenecks but in reality we have free capacities of around 3.5 million barrels per day.

We can activate this cushion any day. Badri was responding to a question about political risks to oil supply, notably in Opec producers Nigeria and Iran.

He said that Opec did not plan to reintroduce an official price band for oil, but added, I believe I can say that we feel comfortable if the oil price doesnt fall below $50. A price above $80 would not please us either. Asked whether Opec would raise production quota at its next meeting in Vienna on September 11, Badri said it was too early to say.

Reuters