'Politics' behind high oil: OPEC head

'Politics' behind high oil: OPEC head

Associated Press, Sydney

OPEC president Purnomo Yusgiantoro blamed a "political
premium" of US$10-$15 a barrel for soaring oil prices on
Wednesday, saying the oil cartel is exceeding its supply quotas
but the market is not responding.

Purnomo said OPEC was concerned about the high oil prices but
exceptional circumstances restricted its room to maneuver on the
issue.

"According to our view based on the fundamentals -- supply and
demand values -- the price should not be as high as what we see
today," he told reporters at the 19th World Energy Congress in
Sydney.

"What we see is a political premium between $10-$15 per
barrel."

Purnomo, who is also Indonesia's Energy Minister, cited market
speculation and geo-political factors including unrest in the
Iraqi city of Najaf and Russian government action against the
country's largest oil producer Yukos, for the high oil price.

He expects prices to fall from current levels of more than $40
by the end of the year, based on contracts exchanged on oil
futures markets.

Asked to speculate on how much the price could fall he
replied: "Boy ... $5 a barrel?"

In Asian trade Wednesday, oil prices continued to weaken as
concerns over the possible impact of Hurricane Frances on the
southern U.S. states which are home to major oil production and
refinery facilities faded.

In early afternoon deals, New York's reference contract, light
sweet crude for October delivery was at $43.22 a barrel, down
from the $43.31 close Tuesday.

Purnomo also said the Organization of Petroleum Exporting
Countries was likely to change its target band of $22 to $28 a
barrel at a meeting in Vienna on Sept. 15.

He refused to comment on where the revised band might be set
but said it would reflect the impact of inflation and
depreciation of the U.S. dollar since the current target band was
set in 2000.

Purnomo previously told reporters at the congress that the
OPEC target band could be set at $26 to $34.

He was non-committal on whether this month's OPEC meeting
would authorize an increase in oil supply to force down prices,
saying world supply was already exceeding demand by 2.7 million
barrels a day.

"We will see after we have updated our figures," he said
"There is a monitoring committee that will be reporting to us the
day before the conference ... I have no information from them
yet."

OPEC represents 11 countries -- Algeria, Indonesia, Iran,
Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.

Purnomo said the cartel's quota was 26 million barrels a day
but it was currently pumping almost 30 million barrels, although
he conceded the two million barrels a day from Iraq fluctuated
according to the security situation.

He expected Iraq to contribute a stable three million barrels
a day after planned elections early next year.

The United Arab Emirates and Qatar have already said OPEC
should increase its target price band at the Vienna meeting.