Market tensions tied to lack of sweet oil, Iran says

May 1, 2011 - 0:0
LONDON (Dow Jones)- The Organization of Petroleum Exporting Countries can't do anything to assuage market concerns because there is an excess of sour crude but high demand for rarer sweet oil, Iran’s OPEC governor said Friday. The remarks underscore the complexity of the task at hand for OPEC. The group is set to meet on June 8 for the first time this year amid rocketing oil prices. In an interview, Mohammad-Ali Khatibi, OPEC governor for Iran, which holds the presidency of the producers' group, said: ""The market, as a whole, is oversupplied."" But he said ""the problem is the quality of crude available."" Due to Libyan disruptions, some potential buyers ""cannot find sweet and light crude,"" he said. Crudes are classified between sweet and sour, whether they are high or low in sulfur content, and between heavy and light, or high or low in wax content. Libya's crude is sweet and light. The remarks echo views earlier this month by OPEC kingpin Saudi Arabia, a producer of crudes heavier than Libya, saying there was too much oil on the market. Since most of the spare capacity available is sour and heavy, ""it's not easy to add light and sweet crude"" to the market, Khatibi said. Adding to the Libyan problem, ""demand is strong"" for sweeter crude because of Japan's need to replace closed nuclear plants with increased refining throughput, Khatibi added. ""We cannot do anything"" to respond to market concerns, he said. Worries over tightening supplies due to unrest in Arab countries have pushed oil prices by about $25 a barrel to more than $120 a barrel since the beginning of the year. The fast increase in prices has led to fears it could damage oil consumption, a view dismissed by Khatibi. ""I don't think demand will be damaged by current prices,"" Khatibi said. He said that much of the nominal increase in oil prices was ""because the U.S. dollar is weaker and weaker."" ""But for consumers with a currency stronger than the dollar, the price is not so high,"" the official said.