MADRID (Reuters) - OPEC could not replace lost Iranian output should Tehran carry out its threat to stop oil exports if attacked, OPEC President Chakib Khelil said on Tuesday.
“It’s obvious that if you curtail 4 million barrels per day (bpd) from the market, you are going to have a big problem. I don’t see who can replace that, including OPEC,” Khelil told a news conference in Madrid.
Khelil said the perceived threat of conflict had helped to drive oil prices higher, although he said the main reason for crude near $143 a barrel was the weakness of the U.S. dollar.
“Unless we address those causes we’re not going to see low oil prices ... We need to do something about geopolitics. We need to do something about the dollar,” Khelil, who is also Algeria’s oil minister, said.
Fears that Iran, OPEC’s second largest producer and the world’s fourth biggest producer, could retaliate by disrupting oil exports if attacked by Israel or the United States over its nuclear program have weighed on the oil market for months.
The depreciation of the U.S. dollar was another big factor, Khelil said, adding that its impact on the oil price was even greater.
Oil, like most commodities, is priced in dollars and most commodity prices have rallied to make up for the drop in the value of the currency used to price them.
The dollar has fallen sharply against the euro and a basket of currencies as the U.S. Federal Reserve has slashed interest rates this year to shore up the financial system and the wider economy from a credit crunch triggered by crisis involving sub-prime mortgages.
Khelil said oil prices would probably rise again if the European Central Bank raised interest rates on Thursday because the euro would strengthen against the U.S.
A Reuters poll of 81 economists last week showed 77 respondents expecting a rise in rates. A rise in rates would depress the dollar, pushing oil prices still higher.
“One of the major issues right now is whether we are going to have another devaluation (of the dollar) in July,” he said.
Khelil said he expected continuing volatility and uncertainty in the oil market.
“Prospects for oil prices are extremely uncertain and highly volatile. We don’t know if they will stabilise or come down,” he said.
Khelil said he expected world oil demand to rise by 1 million barrels per day (bpd) a year and that supplies would need to keep pace with this increase over the next five years.
The OPEC president said he expected OPEC’s crude production capacity to increase by 4 million barrels in the next four years and added that while the world had enough reserves to last for decades, the main worry was in delivering it to the market.
Reporting by Santosh Menon and Daniel Fineren
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