VIENNA, March 6, 2008 (AFP) — OPEC's move to keep oil output unchanged was a message to the market that crude supplies are sufficient, a view not shared by speculators who pushed the price of crude to fresh record highs on Thursday, analysts said.
The Organisation of Petroleum Exporting Countries, which produces 40 percent of the world's oil, decided at an output policy meeting on Wednesday in Vienna to maintain its daily crude production target of 29.67 million barrels.
Following the decision, the price of New York crude rose to new all-time highs, reaching more than 105 dollars per barrel on Thursday.
"Prices surged in the fallout from what was an absolute hysterical reaction to OPEC's decision" and news that US crude inventories had fallen last week, said the Schork Report, which provides analysis of energy markets.
"Thus, when OPEC tells us the (oil supply and demand) fundamentals have decoupled from prices and the speculators are running roughshod over the futures market, they have a point," it added.
OPEC on Wednesday blamed the high cost of crude on speculative buying as investors sought a haven amid a weak dollar and high inflation.
"You get the feeling that even if OPEC had announced a production increase the market was still going to move higher," said the Schork Report.
"So let this be a lesson (to OPEC). When you tell the market you lost control of the pricing mechanism, then the market is going to assume that mechanism in your place," it added.
OPEC, which comprises 13 member countries including Saudi Arabia, the world's biggest producer of crude, said in a statement Wednesday that the market was "well-supplied, with current commercial oil stocks standing above their five-year average".
But US President George W. Bush was said to be "disappointed" that the cartel chose not to increase output.
"He is disappointed that they decided not to increase production," White House spokeswoman Dana Perino said.
Bush "does not think it's a good idea for their biggest customers, such as the United States, to have an economic slowdown, in part because of high gas (gasoline or petrol) prices.
"We know that there is high global demand and there is tighter supply. So what we would like is to see an increase in supply from OPEC," Perino added.
The price of oil has doubled since the start of 2007, driven in large part by soaring demand for crude from emerging economic powers China and India.
Speculators have latched onto this, as well as diplomatic friction or unrest affecting oil producing countries such as Iran and Nigeria.
"The fundamentals are still miles away from providing a clear justification for the current price level," Petromatrix analyst Olivier Jakob said following OPEC's latest output decision.
The International Energy Agency, an official energy watchdog for oil-consuming countries, criticised the cartel's move to leave its production unchanged and urged OPEC to take note of high crude prices.
"The decision by the Organisation of Petroleum Exporting Countries to leave output unchanged may allow crude stocks to rebuild ... but high prices are sending a strong signal that the market thinks it is not enough," IEA said in a statement.
The Paris-based organisation added: "We may need more oil before the summer and therefore urge OPEC countries to listen to market signals."
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