OPEC, Asia Ministers Call for Oil-Market Oversight (Update2)

April 26 (Bloomberg) -- OPEC and 13 Asian countries urged greater oversight of oil and other commodity markets to prevent a surge in prices after the global economy recovers from the worst recession since World War II.

Participants in a ministerial energy roundtable in Tokyo sought limits on positions in over-the-counter trades and said “excessive” oil-price movements are “undesirable,” according to a statement released after today’s meeting. They also called for “continuous” investments to boost energy supplies.

Asia’s biggest oil users met the world’s largest producers to discuss ways to revive spending and ensure stability in energy prices and supplies after the recession ends. Last year, the U.S. Commodity Futures Trading Commission initiated an investigation to determine whether crude prices reached record levels because of manipulation.

“Greater oversight of over-the-counter trading is challenging,” Ken Hasegawa, a Tokyo-based commodity derivatives sales manager at Newedge, said after the one-day meeting. “I doubt each government of OPEC and Asian countries is able to look into every oil and commodities contract done by banks, traders and speculators, including sovereign wealth funds.”

The Organization of Petroleum Exporting Countries unveiled a plan in January seeking regulations to cap speculative trading by investors who buy oil without planning to use it. Oil futures in New York have gained 16 percent this year and are still 65 percent below the record $147.27 a barrel reached in July 2008.

U.S. Legislation

The U.S. House Agriculture Committee in February approved legislation that would place limits on positions a trader can hold in commodity markets as the government seeks more control over derivatives. At present, such limits on speculative positions exist only for agricultural products. The bill would also enhance the U.S. Commodity Futures Trading Commission’s oversight of credit-default swaps.

At a meeting in London this month, policy makers from the Group of 20 industrial and emerging economies called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks.

Qatari Oil Minister Abdullah bin Hamad al-Attiyah and Japanese Trade Minister Toshihiro Nikai co-chaired today’s roundtable, and delegates included Saudi Arabian Oil Minister Ali al-Naimi and International Energy Agency head Nobuo Tanaka.

“We are not yet certain how we will create and control” limits on trading positions,” al-Attiyah said at a press conference in Tokyo. OPEC and Asian governments would need to watch what measures are adopted by the G-20, he said.

‘Join Forces’

“We will take actions to avoid any excessive volatility in commodity futures, and Japan will look into what measures are appropriate,” Nikai said at the briefing. He said oil producing and consuming countries must “join forces” to tackle “supply issues” that may emerge after the world economy recovers.

Paris-based IEA said yesterday falling investments in production may result in a global oil shortage by 2013.

“Investments have dropped, and if this continues, an oil crunch would emerge,” Tanaka, IEA’s executive director, said in an interview in Tokyo. “I can’t rule out the possibility of an oil supply constraint in 2013 and 2014.”

Ministers at the roundtable said oil-producing and consuming countries must stem a decline in exploration and output.

“The drying up of liquidity to fund projects underpinning economic growth in emerging and developing economies has been a significant consequence of the recession,” Saudi Arabia’s al- Naimi said in the text of a speech at today’s meeting.

‘Great Concern’

OPEC members have delayed 35 drilling projects, the Wall Street Journal reported on Feb. 10, citing the group’s Secretary General Abdalla Salem el-Badri. Saudi Arabia and Kuwait have called off or deferred ventures to find new fields, expand existing wells, and build refineries, according to Japan’s trade ministry.

Falling investment “is of great concern, notably for energy-sector projects adversely affected by oil price volatility and lower demand for oil, when long-range commitments of adequate and timely investment flows are needed to ensure future supply,” al-Naimi said.

OPEC, supplier of about 40 percent of the world’s crude, faces a 51 percent plunge in net oil revenue this year, according to the U.S. Energy Department, which estimates the group will earn $476 billion. Spending on new energy production is likely to decline around 20 percent this year, according to the IEA, the Paris-based adviser to 28 nations.

“Low prices and the resulting drop in income of producing countries is creating problems for their economic stability,” al-Attiyah of Qatar said a speech today. “The illiquidity of global financial markets is also making it difficult for companies to invest, even in high-return projects.”

The Asian Energy Ministerial Roundtable meeting is held every two years. The group last met in Riyadh, Saudi Arabia, in May 2007.