15 August 2004	Sunday	28 Jamadi-us-Saani 1425

TEHRAN, Aug 14: Iran's envoy to Opec Hossein Kazempour Ardebili said on Saturday the world was amply supplied with oil but predicted that prices would continue to rise because they are no longer linked to market factors.

"Currently, there are over 2.8 million barrels of oil (per day) as surplus supply in the world's stockpiles, therefore there is no reason to supply more oil, even if feasible," Kazempour told the oil ministry's news agency Shana.

But he added, "Obviously, oil prices will have an upward trend regardless of the fundamental factors of the market, namely supply and demand."

Oil prices broke the $46 per barrel mark on Friday in New York.

Kazempour said: "Opec cannot do anything about the current situation, because the situation has nothing to do with Opec, and the more Opec members produce oil, the higher the global stockpiles will become."

He attributed the record prices to political and military events, concerns over future oil supplies and Opec's inability to pump more oil than current levels.

"Once a calm political atmosphere rules the market, the amount of oil pumped into the stockpiles will exert pressure on oil prices," he predicted.

Referring to violations by Opec members of their production quotas, Kazempour said: "Some of the members are willing to have their excessive production recognized within the cartel's quota, while some others believe that it is difficult to track violations."

From June through August, Opec added 2.5 million bpd to its official quota, producing 26 million bpd amid concerns over the crisis in the Middle East. Iran's current quota is 3.744 million bpd, and its production and capacity are around 3.9 million bpd, Shana said.

On the other hand, Iran faces a growing shortfall in supplies of vehicle fuel, with heavily-subsidized petrol consumption reaching 70 million litres a day, the oil ministry's news agency Shana reported on Saturday.

Average consumption has reached 66 million litres, compared with a daily output by Iran's refineries of some 39 million litres, obliging the Islamic Republic to import the rest at an annual cost of $1.5 billion.

Despite a 23 per cent price hike for the Iranian year that started March 20, pump prices are still only 800 rials (less than $10 cents) a litre for standard, lead-free petrol and 1,100 rials for super.

This is close to 2.5 times less than the real price, with the difference being made up by subsidies totalling $3.5 billion a year.

This not only makes for heedless consumption in a country with inadequate public transportation and a large number of old and uneconomical cars, but massive smuggling of fuel to neighbouring countries.

The government is unwilling to raise the price again but is considering other steps along with appeals to cut down on fuel use.

One measure just launched is the production of an electronic smart card for buying petrol, enabling individual purchases to be monitored and rationing to be introduced if necessary.-AFP