OPEC members move into euros from dollars: Report
Tuesday, December 7 2004 - 12:11 AM WIB
In its quarterly report released on Sunday, the bank, a forum for world central banks, attributed the trend partly to U.S. interest rates' having fallen below those of the euro zone.
The report said that the dollar-denominated deposits of OPEC members had fallen to 61.5 percent of their total deposits in the second quarter of 2004 from 75 percent in the third quarter of 2001.
The share of euro-denominated deposits rose to 20 percent from 12 percent over the same period.
The bank, based in Basel, Switzerland, was cautious about its findings, noting that less revenue from oil seemed to have gone into the international banking system recently, but it added that there had been a "subtle but noticeable" shift in the composition of deposits in the past three years.
"Since the third quarter of 2001, oil revenue seems to have been channeled increasingly into euro and other currency deposits," the bank said. "This shift out of U.S. dollars probably reflected to some extent the relative change in interest rates in the United States and the euro area since 1998."
The bank said U.S. short-term interest rates were on average 2.1 percentage points higher than those of the euro area between December 1998 and March 2001, but they were 1.3 percentage points lower on average between April 2001 and June 2004.
Oil prices were up as much as 70 percent at one point this year from early January amid growth in demand and concerns about supply. In the three months that ended in June, the U.S. crude oil price hit a record high above $40 a barrel. It reached $55.67 in October but has since fallen back to around $42.50. Speculation that Middle Eastern central banks and investors shifted funds out of the dollar and into the euro contributed to the U.S. currency's decline over the past three years. The euro hit a record high of $1.3383 on Thursday.
OPEC consists of Saudi Arabia, the world's biggest oil producer, plus Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, the United Arab Emirates and Venezuela. The bank excluded Indonesia from the study, as it became a net oil importer this year.
However, there are few data to suggest where the surging oil revenue is going, an economist familiar with the report said.
Some of the revenue could have been invested in local infrastructure, gold or deposited with domestic banks. Alternatively, some revenue could have gone into securities or government bonds, the economist said.
OPEC to keep output high
The oil cartel is likely to keep production at a 25-year high to prevent shortages during the Northern Hemisphere winter and reduce prices, Bloomberg News reported on Monday, quoting OPEC officials.
The group will meet starting on Friday in Cairo to discuss production for the first quarter of 2005. Analysts said members other than Saudi Arabia had little capacity to pump more to compensate for disruptions in supplies from Nigeria and Iraq.
"We all know they're producing at or close to capacity," said Robert Ebel of the Center for Strategic and International Studies in Washington. "They would be well advised just to sit tight."
As of Nov. 1, OPEC members excluding Iraq raised production by a million barrels a day, to 27 million barrels.
The organization may try to keep the minimum price of U.S. benchmark oil close to $40 a barrel, The Wall Street Journal reported, citing unidentified officials of member countries.
Some OPEC members want the group's target price, based on a selection of benchmark crude oil varieties, to be at least $30 a barrel, the newspaper said.
That would equate to $40 a barrel for U.S. light benchmark crude. OPEC's current target is $22 to $28 a barrel.
Crude oil for January delivery was quoted early on Monday at $42.90, up 36 cents, on the New York Mercantile Exchange. (*)