Washington attacked Opec on Wednesday for its refusal to increase oil production after an unexpected drop in US crude oil inventories pushed prices to a record high.
In a strongly worded criticism, President George W. Bush accused the oil producers’ cartel of damaging the US economy.
Mr Bush said high oil prices were “making it harder here in America for working families to save and for farmers to be prosperous and for small businesses to grow”.
He said he was “disappointed” by Opec’s decision to leave its production limits unchanged in the face of record energy prices. US oil prices on Wedneday jumped $5.04 to a record of $104.56 a barrel.
Opec said in its communiqué on Wednesday that the market was “well-supplied, with current commercial oil stocks standing above their five-year average”.
The cartel also “noted, with concern, that the current price environment does not reflect market fundamentals”.
But Mr Bush said: “It should be obvious to all that demand is outstripping supply and it’s making prices go up.” US crude oil stocks unexpectedly fell last week by 3.1m barrels to 305.4m barrels, nearly 6 per cent below last year’s level.
Francisco Blanch, of Merrill Lynch, said the fall in US inventories highlighted the vulnerability of the supply side.
Chakib Khelil, Opec’s president, blamed the recent rise in oil prices on financial speculation associated with the weakness of the US dollar. “What is happening in the oil market is due the mismanagement of the US economy,” he said.
Investors have been pouring money into commodities, particularly oil, to hedge against the fall of the dollar driven by cuts in US interest rates.
James Crandell, of Lehman Brothers, said: “To the extent that the US economy is weakening, people expect further rate cuts from the Federal Reserve, which pushes oil up even higher. There is a feedback loop that is self-fulfilling.”
However, Samuel Bodman, the US energy secretary, said on Wednesday: “They [Opec] see speculation in the market, I see a decline in global inventories.”
Some hawkish countries such as Algeria and Venezuela, which believe that Opec should soon cut production, had wanted to arrange another cartel meeting next month but moderates led by Saudi Arabia refused.
The decision not to call a meeting ahead of the next scheduled gathering on September 9 signals that most cartel members will allow inventories to rise during the next six months.
The cartel forecast a larger-than-usual increase in inventories in the second quarter of about 1.2m b/d, and a further increase of 0.4m b/d in the third quarter.
David Kirsch, of consultants PFC Energy, said most countries were comfortable leaving Saudi Arabia, the world’s largest producer and Opec leader, to curb its production covertly if demand weakened in the next few months.
The kingdom currently pumps about 9.2m barrels a day, well above its 8.9m b/d official limit, as set by Opec.
The International Energy Agency, the rich countries’ energy watchdog, warned that the world economy “may need more oil before the summer and therefore urge Opec countries to listen to market signals”.
