Report: OPEC president sees oil at $170 this year

Khelil blames Fed, falling dollar, increased demand for surging crude prices

Last update: 1:24 p.m. EDT June 28, 2008

SAN FRANCISCO (MarketWatch) -- Oil prices will climb to $170 a barrel this year because of increased demand, political tension and decisions made by monetary policymakers in the U.S. and Europe that have devalued the U.S. dollar, OPEC President Chakib Khelil told Bloomberg News on Saturday.

"Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro," Khelil, leader of the Organization of the Petroleum Exporting Countries, said, according to the news service.

Political pressure on Iran and the depreciation of the U.S. currency have caused a surge in oil prices, Khelil explained.

Crude prices hit a record $142.99 a barrel on Friday in New York trading. See full story.

That's sparked debate about whether a lack of new supply, rising demand or speculation is driving prices ever higher. OPEC argues that supplies are sufficient, a message Khelil repeated on Saturday.

"There is more than enough oil in the market to meet the international demand," he told Bloomberg. "The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices," he explained.

Oil may extend gains if the ECB boosts rates on July 3, further weakening the U.S. currency, Bloomberg said, noting that the greenback has declined 15% against the euro in the past year.

The Fed left U.S. interest rates on hold on Wednesday at 2%, after a series of cuts designed to cushion the impact of the mortgage-fueled credit crunch. See full story.

On the same day, European Central Bank President Jean-Claude Trichet said policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation.

The U.S. dollar has dropped against the euro and other currencies in recent weeks on expectations the Fed won't raise rates too soon for fear of exacerbating a U.S. economic slowdown. See full story.