OPEC Powerless To Stem Oil Price Surge - Reuters

LONDON (Reuters) - "Oil prices have surged to new 13-year highs above $40 a barrel on concern that OPEC may not pump enough oil to meet rapidly accelerating world oil demand. U.S. light crude climbed to a peak at $40.38 a barrel on Wednesday, less than $1 off the 41.15, all-time high for New York crude futures, reached in October 1990 after Iraq invaded Kuwait. London Brent crude was up 14 cents at $37.50 a barrel.

Importing nations are increasingly worried about the economic fallout of higher energy costs. The price spike has come during the second quarter, when world oil demand is at its lowest seasonal ebb, raising concerns about prices later in the year as demand rises again.

OPEC President Purnomo Yusgiantoro of Indonesia said on Wednesday the cartel is already pumping more than two million barrels daily in excess of official supply limits in a bid to cool world oil prices. "We have not discouraged our members from producing more because we want to do everything we can to stabilise prices," Purnomo was quoted as saying in a statement released from OPEC headquarters.

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The International Energy Agency, adviser on energy to 26 industrialised nations, said OPEC holds around 2.5 million bpd of spare capacity -- just a three percent cushion for the 80 million bpd world market, nearly half in Saudi Arabia."

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http://www.evworld.com/view.cfm?section=communique&newsid=5675

on news that OPEC ministers were encouraging greater production to head-off higher prices and a slowing of the global economy. The drop, however, was purely due to a psychological effect on traders. Once they realize that OPEC nations have already been exceeding the April cap and can't do much to increase production, prices will rise again.

close to 41 today, gonna break record soon.

I suspect we'll see a global recession soon, and that should take the pressure off for a few years.

But when the next recovery comes, life is going to get interesting.