The rise in global oil prices in recent years has more to do with financial market volatility than fundamentals, Saudi Oil Minister Ali Al-Naimi said on Thursday in a speech delivered at the Seoul National University here. Al-Naimi was conferred an honorary doctorate degree by the Seoul National University. OPEC ministers have repeatedly said that increased speculative trading, the weakening US dollar and other factors beyond their control for the rapid rise in oil prices , which have quadrupled in the past five years. He also said Asia's oil consumption was expected to rise by 20 million barrels per day, driven by strong economic growth, and would account for 60 percent of the expected increase in global oil demand by 2030,. Al-Naimi made no reference to current oil market conditions or prices in the speech. “The short-term oil price gyrations seen in recent years are more closely tied to the internal logic of the financial markets than to underlying supply/demand fundamentals,” Al-Naimi said in his speech. Consumer nations have called on OPEC to ramp up production to help ease the sting of high fuel prices, but most members have resisted, saying that markets are well supplied and stocks ample. Oil prices rose on Thursday, boosted by weakness of the dollar, as the market shrugged off a downgrade by OPEC of global demand growth for crude, analysts said. New York's main oil futures contract, light sweet crude for June delivery, rose 88 cents to $125.36 per barrel. It had struck a record high of $126.98 on Tuesday but slumped Wednesday. London's Brent crude contract for June gained 77 cents to $122.63. “Crude futures were a little higher (Thursday) ... recovering from last night's losses, also underpinned by a temporary weakness in the US dollar against the euro on positive German growth data,” said Sucden analyst Andrey Kryuchenkov. “The broad weakness in the greenback had played a vital part in the recent oil rally, making crude relatively cheaper for foreign investors and as market participants were buying into commodities to hedge themselves against inflation. “However, in the past weeks investor attention was diverted to the market fundamentals, following various supply disruptions and strike actions,” Kryuchenkov added. US oil prices fell back below $124 a barrel on Thursday after Iran reassured markets it would not cut exports, US data showed a rise in distillate inventories and the US dollar held firm, but prices remain near Tuesday's record of near $127. A lack of spare crude output capacity and tight refining capacity has helped fuel the six-year rally in oil prices, but Al-Naimi said the supply outlook remained bright. “The world economies today are more energy efficient than any time in history,” he said. “From the perspective of oil and gas resource endowment, the picture is different from what the resource pessimists paint.” Proven global oil reserves have risen from 667 billion in 1980 to to 1.2 trillion barrels now, even though the world has consumed some 700 billion barrels in the interim, he said. In Vienna, OPEC on Thursday downgraded slightly its 2008 estimate of growth in world oil demand, as high prices and slower economic growth brake demand in major industrialized countries and the United States in particular. Global oil demand was now projected to grow by 1.35 percent in 2008, compared with the previous estimate of 1.4 percent, the Organzation of Petroleum Exporting countries said in its May monthly report. “World oil demand growth in 2008 is forecast at 1.2 million barrels per day (bpd) to average 86.95 million bpd, representing a minor downward revision from last month,” OPEC said. While the slowing world economy and mild winter weighed on demand in industrialized countries belonging to the Organization for Economic Coooperation and Development, oil demand remained strong in non-OECD countries, OPEC said. “As expected, world oil demand grew mostly in the non-OECD regions,” the report said. “OECD oil demand was very weak, although winter product demand improved across Europe. US oil consumption declined sharply, due to both the slowing economy and warm winter weather.” With the winter ending in the northern hemisphere, “oil demand growth will follow a slow consumption cycle in the second quarter,” OPEC predicted. “Moreover, this year's summer driving season is not likely to show its normal annual growth due to the anticipated weaker gasoline demand in the US.”
