26 Apr 2009
April 26 (Bloomberg) -- OPEC and 13 Asian countries may call for measures to curb speculation in crude oil to prevent a surge in prices once the global economy recovers from the worst recession since World War II.Ministers participating in an energy roundtable in Tokyo may seek increased oversight of over-the-counter trades in oil and its derivatives, according to a draft of a statement to be released by the chairmen after today's meeting, a copy of which was obtained by Bloomberg News. The document, which may change, calls for limits on speculative positions in oil futures.
"The oil market needs transparent trading in an orderly manner," said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. "Calls for reinforcement of trade regulations won't stop."
Asia's biggest oil users are meeting the world's largest producers in Tokyo to discuss ways to revive spending and ensure stability in energy prices and supplies after the recession ends. Qatari Oil Minister Abdullah bin Hamad al-Attiyah and Japanese Trade Minister Toshihiro Nikai are co-chairs, and delegates include Saudi Arabian Oil Minister Ali al-Naimi and International Energy Agency head Nobuo Tanaka.
"Regarding transparency of commodity markets and supervision on over-the-counter markets, participants called for further harmonized actions such as introduction of position limits," according to the draft statement. "Participants recognized that excessive fluctuations in oil prices are undesirable for both energy producers and consumers, and that financial markets have an impact on oil price formation."
Speculative Trading
The Organization of Petroleum Exporting Countries unveiled a plan in January seeking regulations to cap speculative trading by investors who buy oil without planning to use it. Oil futures in New York have gained 16 percent this year and are still 65 percent below the record $147.27 a barrel reached in July 2008.
The U.S. Commodity Futures Trading Commission initiated an investigation last year into the causes of oil price gains in an attempt to determine whether record levels were reached because of manipulation.
The U.S. House Agriculture Committee in February approved legislation that would place limits on positions a trader can hold in commodity markets as the government seeks more control over derivatives. At present, such limits on speculative positions exist only for agricultural products. The bill would also enhance the U.S. Commodity Futures Trading Commission's oversight of credit-default swaps.
Boosting Investment
The ministers may call upon oil-producing and consuming countries to stem a decline in exploration and output, according to the draft statement.
"The drying up of liquidity to fund projects underpinning economic growth in emerging and developing economies has been a significant consequence of the recession," Saudi Arabia's al- Naimi said in the text of a speech at today's meeting.
Lower investment "is of great concern, notably for energy- sector projects adversely affected by oil price volatility and lower demand for oil, when long-range commitments of adequate and timely investment flows are needed to ensure future supply," al-Naimi said.
OPEC members have delayed a total of 35 drilling projects, the Wall Street Journal reported on Feb. 10, citing the group's Secretary General Abdalla Salem el-Badri. Saudi Arabia and Kuwait have called off or deferred ventures to find new fields, expand existing wells, and build refineries, according to Japan's trade ministry.
Stability Threatened
OPEC, supplier of about 40 percent of the world's crude, faces a 51 percent plunge in net oil revenue this year, according to the U.S. Energy Department, which estimates the group will earn $476 billion. Spending on new energy production is likely to drop around 20 percent this year, according to the IEA, the Paris-based adviser to 28 nations.
"Low prices and the resulting drop in income of producing countries is creating problems for their economic stability and investment in additional capacities essential for the future," al-Attiyah of Qatar said in his opening speech today. "The illiquidity of global financial markets is also making it difficult for companies to invest, even in high-return projects."
The International Energy Agency said yesterday falling investments may result in a global oil shortage by 2013.
‘Oil Crunch'
"I can't rule out the possibility of an oil supply constraint in 2013 and 2014," Tanaka, the executive director of Paris-based IEA, said in an interview in Tokyo. "Investments have dropped, and if this continues, an oil crunch would emerge."
The Asian and OPEC ministers may say that carbon-capture and storage systems must be developed globally in a bid to maintain the use of fossil fuels as the main energy source while reducing emissions of gases blamed for global warming, according to the draft statement. The technology, known as CCS, allows power plants and factories to store carbon dioxide underground.
The ministers may also call for increased investments in building nuclear power plants, according to the draft document.
The Asian Energy Ministerial Roundtable meeting is held every two years. The group last met in Riyadh, Saudi Arabia, in May 2007.
