LONDON: Oil prices have been hiked by up to 20 per cent as the West starts hoarding crude oil in the face of a possible American-led war against Iraq, say analysts.
Brent crude, which closed at $25.14 per barrel in London on Friday, is at least $5 overpriced given the poor state of the world economy.
Almost all of the increase is down to the build-up of strategic reserves, says the consultancy set up by the former Saudi Oil Minister, Sheikh Yamani.
“With the level of buying going on, it’s difficult to see all the oil being used by end users when the economics figures are so bad,” says Julian Lee, senior energy analyst at Yamani’s London-based Centre for Global Energy Studies.
The news comes as the Organization of Petroleum Exporting Countries ponders retaining curbs on production, which could push prices even higher.
The stockpiling is being coordinated by the International Energy Agency, the 26-member OECD organisation set up to counteract the power of the Opec cartel.
The United States, Japan and Germany hold a total of 3.8 billion barrels in stocks, some 114 days of net imports. IEA rules say that countries should hold reserves amounting to 90 days of net imports.
President Bush has already announced that the US is seeking to fill its strategic reserves.
They were last used by Bill Clinton, when oil prices peaked close to the 2000 presidential election.
“We’re seeing a desire to build up stocks in futures and spot prices. If not, the price would be closer to $20 than $25,” says Lee.—Dawn/The Guardian News Service.
