OPEC producers have said that they fear an expected deal this week to hoist crude output limits may fail to quell an escalating scare over rising world oil prices.
Ministers from the Organisation of the Petroleum Exporting Countries (OPEC), meeting in Beirut tomorrow, said they could not guarantee to ease prices catapulted to a new 21-year high by Saturday's attack in the Saudi oil city Khobar.
US oil prices set a new record of $42.10 a barrel yesterday, up $2.17, as they re-opened after a holiday weekend and reacted to the targeting of foreign oil workers claimed by al-Qaeda that left 22 dead. If these higher prices remain, then it is likely to knock on to higher prices for petrol and oil prices on world markets, including the Republic.
"A supply increase will not help lower prices," said Iranian oil minister Mr Bijan Zanganeh.
"The fear factor, we cannot control it, we wish we could, but we will do something," said Qatari oil minister Mr Abdullah al-Attiyah said.
OPEC is considering lifting supply quotas by 2-2.5 million barrels daily, 8-11 per cent.
But heightened concern over political instability in the cartel's leading producer Saudi Arabia is spoiling OPEC efforts at toppling prices that threaten to slow world economic growth and hit fuel demand. Saudi oil minister Mr Ali al-Naimi said Saudi oil facilities were safe and vowed OPEC would "do its best to make the fundamentals right". His cartel counterparts warned that making sure supply met demand may not be enough to calm fears beginning to border on panic in world oil markets.
Mr Attiyah estimated the fear premium attached to a possible disruption of supplies from the Middle East was inflating crude by $9 a barrel.
"The Saudis are saying that all they can do is make sure there's enough supply. It goes to show how impotent OPEC is at the moment because there's really nothing much wrong with fundamentals," said Mr Nauman Barakat of brokers Refco in New York.
Saturday's attacks have underlined concerns about the ruling Saudi royal family's ability to contain a wave of violence by Islamic militants. "Even if they are not capable of doing serious damage to oil infrastructure, political instability and the threat to the ruling family is of real concern and promises to haunt the oil market for some time to come," said veteran OPEC analyst Mr Geoff Pyne.
"OPEC only has limited scope to do anything about the price. There is no real shortage of supply so the best they can hope for is to have some psychological impact."
Cartel production already is running at least 2.3 million barrels daily above formal quota limits of 23.5 million bpd so an increase in production allocations will only legitimise existing output. Saudi Arabia, the only producer with significant spare capacity, as of Tuesday has opened the taps to nine million barrels daily, irrespective of any official new quota it is likely to be granted.
That adds actual extra volumes of 700,000 bpd with the United Arab Emirates thought capable of pumping an additional 300,000 bpd.
