High price bothers OPEC

High price bothers OPEC

Fitri Wulandari, The Jakarta Post, Jakarta

The Organization of Petroleum Exporting Countries (OPEC) on
Friday expressed concern over soaring oil prices, which further
increased to set a new record of close to US$50 per barrel mark.

OPEC President Purnomo Yusgiantoro said the cartel would meet
in the middle of next month to seek ways to help ease pressure on
prices, and may ask non-OPEC oil producers to also play a role.

"I am very concerned with the high oil prices. We will do our
best to prevent the (oil) prices from increasing," Purnomo told
reporters during a media briefing.

The group, which supplies a third of global oil, will meet in
Vienna on Sept. 14 to discuss its quota policy. The meeting may
involve major non-OPEC oil producers such as Russia.

"Commitment (to lower oil prices) can come from OPEC and non-
OPEC countries. But it also needs help from big oil companies,"
Purnomo said.

Reuters reported that U.S. light crude for September rose to a
new record of $49.27 a barrel late on Friday Jakarta time. London
Brent hit a new record $45.15 a barrel.

The news agency said that oil prices were advancing on
concerns over escalating violence in Iraq and strong demand from
the fast growing economies of China and India.

Clashes between U.S. troops and supporters of Shi'ite Muslim
cleric Moqtada al-Sadr in Najas raised fears of sabotage on Iraqi
oil facilities.

Iraq's main southern pipeline from the Basra oil fields has
been shut down since the last sabotage raid on Aug. 9, curbing
exports to about a million barrels per day, half the normal
capacity.

Iraq is a member of OPEC but its production was not accounted
in the group's output quota.

OPEC is pumping at the highest level since 1979. A report from
OPEC headquarters estimated it could raise production to 30.5
million barrels per day (bpd) next month from 29.57 million in
July.

Undeterred demand for oil from energy-hungry China and India
continues to push crude oil prices higher.

China's oil demand shows no evidence of easing despite government
efforts to slow an economic boom. Chinese crude imports for July
jumped 41 percent with imports for the year to end-July up 40
percent year-on-year, according to customs data.

India's top refiner, state-run Indian Oil Corp. Ltd., said it
expected the country's crude oil imports to rise 11 percent in
2004/05 as demand rises nearly four percent. An oil ministry
official said India's crude oil import bill was expected to rise
50 percent to $27 billion this fiscal year.

Although oil prices headed near $50, Purnomo said the group
has yet to see signs that the oil hike would slow down global
economic growth.

"Demand for goods and services remains strong," Purnomo said.

Indeed, International Monetary Fund director Rodrigo Rato was
quoted by Reuters on Friday as saying he still expected world
economic growth this year of 4.6 percent.

Purnomo also said there was little sign of increasing
inflationary pressure in Indonesia's economy despite the oil
hike.

"There is no sign of high inflation in Indonesia as interest
rates remain unchanged," he said.

But Purnomo said the government was bracing for a higher
deficit in the state budget this year as it had to set aside more
funds to finance fuel subsidies. The government has kept fuel
prices at home unchanged to avoid social unrest during this year
elections.

According to the government, fuel subsidy spending may rise to
Rp 56.90 trillion this year, triple the Rp 14 trillion estimate
given in the state budget.