[NYTr] Adjusted for falling dollar, oil earning less for OPEC

[nytr at olm.blythe-systems.com]

Financial Times - Jul 24, 2007
http://www.ft.com/cms/s/d2b3da82-397d-11dc-ab48-0000779fd2ac.html

Adjusted for falling dollar, oil earning less for OPEC

By Javier Blas 

LONDON -- The falling US dollar is lowering the Organisation of the 
Petroleum Exporting Countries' purchasing power by up to a third,
making the powerful oil cartel more reluctant to increase production
and cut prices.

Although oil is trading near last August's record price of $78.65 a 
barrel, OPEC calculations show that when adjusted for currency 
fluctuations and inflation, oil prices have fallen in the past year.

The adjusted price averaged only $43.60 a barrel in June this year, 
compared with $44.30 abarrel in the same month last year, according to 
the latest OPEC monthly report.

Growing trade between OPEC members, especially those in the Middle East 
and north Africa, and the European Union, is aggravating the problem 
because the value of the pound and the euro has risen against the
dollar.

The dollar yesterday fell to an all-time low against the euro of 
$1.3844, down by 4.9 per cent since January, and dropped to a fresh 
26-year low against sterling, trading at more than $2.06.

Mohamed Bin Dhaen al Hamli, OPEC president, said at the cartel's latest 
meeting three months ago that OPEC was "concerned about the continuing 
weakness of the US dollar" because "this is having a significant effect 
on the purchasing power of oil-producing countries." Since then the 
dollar has continued falling against the euro and sterling.

Eric Chaney, a Morgan Stanley economist, estimates that a 10 per cent 
drop in the value of the US dollar against major currencies cuts OPEC's 
Middle East members' crude oil purchasing power by about 5 per cent.

Adam Sieminski of Deutsche Bank said the refusal of the cartel to 
increase its production to force a drop in the oil price is "more 
understandable if the lower value of OPEC's spending power ... is taken 
into account."

However, the decline in the value of the dollar is also insulating some 
countries from high oil prices, providing OPEC with strong demand even 
as oil prices soar above $75 a barrel.

Non-OPEC members, such as Egypt or Sudan, face problems similar to
those of many OPEC countries.

Oil prices fell yesterday on speculation that OPEC would increase 
production later this year. Brent crude oil, regarded as the best 
indicator of the global oil market, fell 83 cents to $76.81.