OPEC announces creation of new global oil benchmark

OPEC announces creation of new global oil benchmark

CARACAS (Reuters): OPEC President Ali Rodriguez said on Thursday the exporters' cartel has agreed to create a new global oil benchmark to challenge speculation on futures markets, which he blamed for distorting prices.

However, oil industry analysts poured cold water on the idea, accusing the 11-member group of trying to turn back the clock on a huge financial derivatives market.

The crude oils now used as a reference price for the world's market of 76 million barrels per day (bpd) -- Brent Blend, West Texas Intermediate (WTI) and Dubai -- represent just 1 million bpd of output, Rodriguez told a university forum.

"We want to create a new basket (of crude oils) to be used as a global benchmark in order to reduce the very high levels of speculation," said Rodriguez, who is also Venezuelan Energy and Mines Minister.

"The idea has already been accepted unanimously in OPEC and we are talking to some consumers, who welcome it," he added.

OPEC this year set a price target of $22 to $28 per barrel, but has been unable to push prices down into this range despite four output hikes this year.

The cartel blames speculation for keeping prices consistently above $30 per barrel, while futures traders say the high prices reflect concern about possible shortages of some refined products in the United States this winter, and the Arab-Israeli conflict.

Rodriguez said he would make the benchmark a priority once he becomes OPEC Secretary-General on Jan. 1.

The new basket could include OPEC crudes and oil from countries outside the cartel, he added.

Industry analysts were skeptical, saying any new benchmark must be based on a single type of freely-traded crude oil. Some OPEC countries do not allow trading of their crude oil on open markets.

The aging cartel would find it hard to generate sufficient liquidity in any new benchmark, they added, to compete with a multibillion dollar market in financial derivatives where prices are now decided by means of futures, swaps and options.

Oil futures trading on exchanges in New York and London now reaches 150 million barrels daily, double the volume of oil produced in the world.

Rodriguez said he wanted the new benchmark to reduce speculative price moves, both on the upside and downside, which he blamed for distortions of up to $8 per barrel.