INTERNATIONAL. Crude futures for February delivery closed down $1.27 at $97.91 a barrel Friday on the New York Mercantile Exchange after touching the US$100 mark in both of the two previous days.

A US Labor Department survey, showed US payrolls grew at the slowest pace in more than four years, rekindling worries that oil demand from the world's biggest energy user may slow as its economy weakens.

The hike in oil prices comes amid fears over declining stocks, a weak dollar and recent geopolitical troubles, including in oil-producing Nigeria.

Prices to keep rising

OPEC president Chakib Khelil said on Saturday he expected oil prices to keep rising during the first quarter of this year before stabilising in the following quarter.

"The rise is likely to continue until the end of the first quarter 2008 and will stabilise in the second quarter," Khelil, who is also Algerian Energy and Mines Minister, told the Algerian official news agency APS.

He linked the steady rise of oil prices to "political tension in Pakistan, escalading violence in Nigeria and decline of oil inventories in the United States", APS added.

The Opec oil cartel, which decided against raising production levels in December, may consider lifting output in February amid stronger-than-expected winter demand.

OPEC close to maximium  capacity

However some oil officials question OPEC's ability to increase supply on production grounds.

OPEC's production is already close to maximum capacity and the organisation "can do nothing" to curb prices that touched US$100 in New York Wednesday and Thursday, Shokri Ghanem, the Chairman of Libya's National Oil Corp, said.

"Oil consumers should stop passing the buck to OPEC. If they want to alleviate the impact of high oil prices on the economy, they should cut their taxes on energy, take action to reduce the tension in Iraq and Iran, and invest more in petroleum production," he said.

"Prices this year are more likely to increase and exceed US$100, than they are to decrease," Ghanem said.

"Because most members are currently producing at full capacity it seems that even if there is a decision to increase the output ceiling, not all members would be able to increase their production capacity," Mohammad Ali Khatibi, deputy director of international affairs at the National Iranian Oil Company, said, when asked if OPEC would hold an emergency meeting to discuss surging prices.

OPEC unable to meet demand

A new OPEC report, published in the Debember issue of the OPEC Review, indicates the group will be more hard pressed than previously thought to meet the world's surging oil needs and could fail to supply its share of global oil markets as early as 2024.

The report says Kuwait is likely to be an extremely inconsistent and unstable supplier and questions Saudi Arabia's assertion it is capable of meeting world oil demand for the next 50 years.

Using calculations based on the current proven reserves of 11 OPEC member countries (excluding recent entrants Angola and Ecuador), the study maps out three scenarios, which show OPEC could find itself unable to meet its share of global oil demand by either 2048, 2037 or 2024 depending on how quickly its members ramp up output.

The author of the report, Ayoub Kazim, the executive director of Dubai Knowledge Village, the state owned education and knowledge sevices free zone, writes that the "more realistic" scenario assumes OPEC's average oil production will grow annually by 5% to meet a "drastic increase in oil demand from industrialising countries, such as China and India in the next two decades."

The report acknowledges that the projections could be swayed by unpredictable factors, including changes in economic growth rates in the developing world that could greatly affect oil demand growth and future exploration that could boost OPEC's proven reserves.

OPEC distanced itself Friday from the report. "We don't muzzle the opinions of others," OPEC's head of public relations and information Omar Farouk Ibrahim said.

Be he said that the publication "doesn't necessarily reflect the opinions of OPEC."

"The OPEC Review is an academic and research journal and it's an open forum on energy issues," he said, adding that the platform was indicative of the group's openness.

Peak oil

The rise of oil prices and production concerns is renewing interest in the "peak oil" theories which originated in 1956 when the US geoscientist Marion King Hubbert correctly forecast that US oil production would peak in about 1970. The “Hubbert curve” is a totem of peak oil theorists.

The peak oil theorists argue that production has not increased in line with demand simply because it cannot. Oil reserves are finite. Many of the world's biggest fields are already suffering declining output, and that could accelerate, they argue.

Opponents of Peak oil say that oil output is not just a function of geology. “Surface” factors such as Opec, geopolitics, "rate of substitution" , new technology, financial returns and others , have a huge impact.

US$100 a barrel  is a real incentive for oil producers to increase production, if they can. The near future should tell us whether global production has peaked.

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