Sam Fletcher
Senior Writer

Growing demand for middle distillate fuels in Asia and Europe has created a world shortage that can only be resolved by processing more crude to produce these straight-run products. But because additional crude supplies are not forthcoming, the result has been a sharp escalation of crude prices, said analysts at the Centre for Global Energy Studies (CGES), London.

If members of the Organization of Petroleum Exporting Countries increased their total production by 500,000 b/d, world oil prices would begin to retreat, CGES claims. However, the price of OPEC's basket of 13 benchmark crudes averaged $95.27/bbl through late April, with no indication of any interest among cartel members in increasing production and reducing prices.

In its Monthly Oil Report, CGES said: "OPEC's view of a 'fair' price for oil has continued to rise in tandem with actual prices, and there is no sign that the organization intends to take any action whatsoever to try to bring oil prices down. Indeed, the OPEC oil ministers . . . . continue to argue that their actions have had no bearing on oil prices, which, in their view, are being driven higher by a weakening US dollar, geopolitical tensions, non-OPEC production problems, refinery bottlenecks, speculative trading on the futures markets—in fact, just about everything imaginable, with the one glaring exception of their own production policies. OPEC's member-countries consistently produced less oil than the world needed from its residual suppliers in 2007, leading to a massive global stockdraw that averaged 750,000 b/d."