KUWAIT CITY // Fears are growing among Opec nations that they might not be able to keep oil prices under control as concerns mount over a stand-off between Iran and the West.
The group, which accounts for about 40 per cent of the world's crude oil production, can release or restrict the supply of oil to world markets. But Opec is currently pumping at a three-year high of 30.92 million barrels per day (bpd), reducing its idle capacity to around 2m bpd. Yesterday Brent crude, the European benchmark, was trading at US$126 a barrel, a dollar short of the highs of last year during the Libyan conflict and 17 per cent higher than the start of the year.
"There is a lot of tension in oil-producing countries," said Mohammed Al Hamli, the UAE Minister of Energy. "That is reflected in the oil price."
Mr Al Hamli was in Kuwait for a meeting of 88 nations spanning the producer-consumer spectrum, with oil price volatility at the top of the agenda amid the threat of a military confrontation with Iran, Opec's second-biggest producer.
Iran stands at the gateway to the Strait of Hormuz, the narrow waterway through which 20 per cent of the world's oil passes. Western sanctions against Tehran's nuclear programme have already eaten into Iranian exports.
Producers and consumers alike are worried that sustained high oil prices will handicap the global economic recovery and erode demand.
An oil price of $110 to $115 would be acceptable, said Felix Ferreira, the Angolan Opec governor.
"Many countries are already in a recession, and if the oil price is very high it will be really bad news," said Mr Ferreira. "We are not going to take advantage of the price and leave the consumers in bad shape."
But reaching into Opec's spare capacity, most of which is held by Saudi Arabia, would not be effective in driving down prices, he added.
The price rise stems from geopolitical concerns rather than a supply crunch, said Sadad Al Husseini, the founder of the consultancy Husseini Energy in Riyadh.
"People keep looking for Opec to somehow fix everything, but it's out of Opec's hands," said Mr Al Husseini, the former head of exploration and production for Saudi Aramco. "It's a much bigger problem than Opec. It's not a shortage of supply, it's insecurity that is driving up prices.
"You cannot go around rattling sabres and talking about bombing and expect the rest of the world to march on calmly."
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