ALGERIA. OPEC President Chakib Khelil predicted that the price of oil will climb to US$170 a barrel before the end of the year, citing the dollar's decline and political conflicts.
In a Bloomberg telephone interview Khelil said: "Oil prices are expected to reach US$170 as demand for fuel is growing in the US during the summer period and the US Dollar continues to weaken against the Euro."
Political pressure on Iran and the depreciation of the US currency have caused a surge in oil prices, Khelil said.
New York traded crude has more than doubled in a year and touched a record US$142.99 a barrel Friday on the New York Mercantile Exchange as the dollar's protracted slump prompted investors to flock to oil as a hedge against inflation.
Prices were also lifted this week after Libya said it may cut oil production.
OPEC ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. OPEC has argued that speculation and the weak dollar are behind the record prices.
We believe that the market is in equilibrium. The price is disconnected from fundamentals. It is not a problem of supply," Khelil told a briefing as the Jeddah oil summit last week.
Western consumer nations want increased production to ease supply concerns which they say have forced prices up to almost US$143 a barrel.
Hedge funds, pension funds and other speculators have been blamed by many lawmakers and some energy experts for doubling the price for crude oil in the last year. The Bush administration disagrees, saying high prices are the result of world oil production not being able to keep up with growing global fuel demand.
The rising cost of crude is not linked to supply, Khelil told Bloomberg today. "There is more than enough oil in the market to meet the international demand," added the OPEC president, who will take part 30 June in an international energy forum in Madrid.
"The decisions made by the US Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices," Khelil said.
Oil may extend gains if the ECB boosts rates on 3 July, further weakening the US currency.
ECB President Jean-Claude Trichet has made it clear that rates could rise in July to combat inflation.
"It is not excluded that, after having carefully examined the situation, that we could decide to move our rates a small amount in our next meeting in order to secure the solid anchoring of inflation expectations," Trichet said at a news conference earlier this month.
"I don't say it's certain. I say it's possible," he said.
The US House of Representatives on Thursday overwhelmingly approved legislation that directs the Commodity Futures Trading Commission to use all its authority, including the agency's emergency powers, to "curb immediately" the role of excessive speculation in energy futures markets.