OPEC not able to cool crude prices rising to the level of US$60

21-Jun-05

The move of the Organization of the Petroleum Exporting Countries (OPEC) of raising its daily output ceiling by 500,000 bpd earlier this week, has had little impact on crude prices that have scaled new heights nearing US$60 a barrel. Government data released last week surprisingly showed that demand is up almost 3% from last year- a growth rate that taken many analysts by surprise. Light sweet crude for July delivery settle at about US$59.37 a barrel, a record close on the New York Mercantile Exchange, where oil futures have been traded since 1983, while Nymex oil futures grew more than 56% higher than a year ago. Prices have risen by almost US$12 a barrel in the last month alone, triggered by concerns about limited refining capacity and rising demand for gasoline and diesel. The possibility of another attempt by OPEC to bring down prices is not unimpressive as the effort could backfire due to the dwindling excess production of the cartel besides which the buyers are to some extent reluctant to buy oil at such high prices. However, if the prices continue rising OPEC is believed to release the 500,000 barrels it had planned to by the end of this week. The question that still hangs on is will this make the preferred difference in the oil prices?