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'Oil to fall when US fixes fuel problems'

US gasoline prices have jumped in recent weeks as refiners shift to new environmental specifications.

india Updated: May 05, 2006 11:18 IST

Lofty world crude oil prices will come down after the United States fixes problems related to new gasoline specifications, OPEC's acting secretary general said on Thursday.

"Products have been driving prices, particularly gasoline in the United States. The resolution of the gasoline problem in the US will be positive for the market," Mohammed Barkindo said on the sidelines of a conference.

US gasoline prices have jumped in recent weeks as refiners shift to new environmental specifications. Some fuel stations along the East Coast and in Texas have briefly run out of supplies due to the transition. NYMEX gasoline futures tumbled on Thursday as the market continued to digest weekly inventory data that appeared to show US refiners increasing output.

Barkindo added that the global energy market was well-supplied with crude and fuel products, and that geopolitical risk had added a $10 to $15 premium in oil prices.

"Geopolitical tensions have become a major factor," he said.

US oil prices hit a record over $75 a barrel last month, driven in part by worries that Iran's face-off with the West over its nuclear ambitions could cause a disruption in supply from the key oil producer.

Barkindo said the OPEC producer group would do "everything possible" to stabilize crude prices. OPEC has been producing near full throttle in recent months.

In prepared remarks later Thursday morning, Barkindo said OPEC expects world oil demand to grow by 1.4 million barrels per day in 2006 and that annual world demand will grow by an average of 1.5 million bpd for the next 15 years.

He also said the cartel's production capacity should reach 38 million bpd by 2010 and 54.3 million bpd by 2025. OPEC pumped about 29.55 million bpd of crude in March, according to a Reuters survey.

However, despite a recent surge in announcements of new refining capacity additions in North America and Asia, OPEC still believes that global refining investment is not keeping pace with demand growth.

"The primary responsibility (to increase refining capacity) lies with the consuming countries. They have the demand, the technology and the capital," Barkindo said.

OPEC believes refiners will need to invest over $160 billion by 2015 to keep pace with demand growth and another $150 billion to keep existing facilities in operation.