petroleumworld

Claude Mandil, head of the International Energy Agency (IEA)

AFP
PARIS
Petroleumworld.com 08 29 07

The head of the International Energy Agency (IEA) criticised OPEC for setting a target price of around 70 dollars per barrel, saying in an interview published Tuesday that it would hit the poorest hardest.

"The market is clearly aware that OPEC has set itself a new implicit price target or a new price band of around 70 dollars (51 euros) per barrel and that the organisation will endeavour to defend this level," Claude Mandil told Arab Oil and Gas review.

"I deplore this, because it is a factor that could, whatever people often say, weigh on world economic growth and which represents a very heavy burden for the poorest people and the poorest countries," he added.

Mandil said oil stocks should continue to rise with oil consumption growing by around two percent a year on average.

OPEC is correct to say that the oil market is well supplied, "but what interests us above all is tomorrow's market, which is to say the end of 2007," he said.

"More crude oil is needed, therefore, but unfortunately the signals being sent out by OPEC do not leave us much hope in that regard," said Mandil.

The next OPEC meeting is set for September 11 in Vienna. For Mandil, an announcement to step up production "is not the most likely hypothesis today."

"Moreover, I have no indications about possible discrete increases on the part of certain producers," he said.

Mandil said that "the investment effort must be stepped up straight away".

He added that "some of the new investments that have just been decided or which are on the point of being decided will not bear fruit until 2012, as a result of which there is a serious risk at or around that date in view of execution schedules".

Regarding the recent subprime home loan crisis in the United States, Mandil said:
"The lasting nature of the impact of this crisis on energy and oil consumption is only a hypothesis for the moment."

"If producing countries are really very concerned about the consequences of this subprime mortgage loan crisis on world economic growth, the right solution would be to try and lower oil prices in order to offset the potential deflationary effects on the economy."

Oil prices extended gains on Tuesday owing to concerns about tight supplies in the United States, which is the world's biggest consumer of energy.

The IEA monitors the energy interests of the industrialised nations.

AFP 28 1613 GMT 08 07