US to caution OPEC on price volatility

The US energy secretary, Steven Chu, says he will caution OPEC ministers on the dangers of oil-price volatility.

The US energy secretary, Steven Chu, says he will caution OPEC ministers on the dangers of rasiing oil prices ahead of the group's meeting on Sunday. The 12-member oil exporters' organisation, which supplies 40 per cent of the world's oil, will meet in Vienna on Sunday to discuss quotas in the face of crude's 70 per cent decline since peaking at US$147.27 per barrel last July. "Volatility could have a real impact in hurting the world economy pulling out of a recession," he said in Washington today. "If the cost of petroleum increases, that will create a huge strain on the ability of the world economy to recover, and I will certainly make my concerns known." Dr Chu declined to say whether he would ask OPEC to refrain from cutting output. Crude oil for April delivery traded below $43 a barrel today on the New York Mercantile Exchange, after falling more than 7 per cent the previous day on news of a bigger than expected increase in US oil stockpiles. OPEC ministers have been divided on whether the group should further reduce quotas, following 4.2 million barrels per day (bpd) of cuts announced since September. Saudi Arabia, the leading OPEC oil exporter, has stressed the need for compliance with existing quota reductions, suggesting the group could hold off from a further cut. Today, a spokesman for the Nigerian National Petroleum Corporation said there was no need for OPEC to deepen the output curbs announced last year. But Rafael Ramirez, the Venezuelan energy minister, said he favoured another cut to help shrink the large oil stockpiles and encourage investment in new production. Daniel Yergin, the chairman of Cambridge Energy Research Associates, said a meeting of the G20 finance ministers this weekend was equally important for the oil price outcome. "GDP is going to determine the [oil] price," he told Bloomberg. "We're now in the Great Recession, and that's what the price reflects. Oil is not only the world's most important commodity, it's a barometer of the global economy. It's telling us the global economy is sick." [e-mail]

Dr Chu declined to say whether he would ask OPEC to refrain from cutting output. "I certainly intend to say that price volatility of oil doesn't do anyone any good, and I will urge OPEC to be as transparent as possible in the way they deal with the issue," he said. The 12-member oil exporters' organisation, which supplies 40 per cent of the world's oil, will meet in three days' time in Vienna to discuss production quotas in the face of crude's 70 per cent decline since peaking at US$147.27 per barrel last July. Crude oil for April delivery traded below $43 a barrel today on the New York Mercantile Exchange, after falling more than 7 per cent today on news of a bigger than expected increase in US oil stockpiles.