DJ UPDATE: OPEC Pres Again Blames Speculators For Oil Price Rise

(Updates with comments about biofuels and diesel)

The president of the Organization of Petroleum Exporting Countries, Chakib Khelil, again Saturday blamed speculators for the steep rise in oil prices, insisting that supply was not a problem.

"There is no problem of supply, the problem is much more linked to speculation," he told a press conference with visiting French Ecology and Energy Minister Jean-Louis Borloo.

He also said the price of oil was closely linked to the exchange rate of the U.S. dollar, which has fallen steeply against other major currencies.

"The consensus is that the crisis is not over and there is going to be a continuing impact on the price of oil because of speculation," he added.

Khelil, who is also the Algerian energy minister, made similar remarks on Monday in an interview with Spanish national radio.

"If OPEC decides to raise production...these hikes will not really lower the price," he said then.

He said Saturday that the cartel of producer nations would not review the situation again until it meets in Vienna on Sept. 9.

Oil prices are still extremely volatile, closing in New York at $127.35 a barrel Friday for light sweet crude for July delivery, up 73 cents on the day but well short of its levels earlier in the week, when crude surged beyond $135 a barrel on concerns about tightening energy supplies.

Khelil also linked the diesel fuel market to the rise in oil prices.

"This crisis originates from the introduction of ethanol onto the market, which contributed to reduced diesel production," said Khelil.

Less diesel fuel production in turn increased oil prices across the board, said Khelil, highlighting the impact of biofuels on oil markets.

OPEC, which pumps 40% of the world's oil, is reluctant to bend to demands that it produce more to damp the red-hot market.

Analysts said recent speculative oil trading had been driven by tight global supplies, the weak dollar, unrest in key crude producers like Nigeria, and OPEC's unwillingness to boost output.

(END) Dow Jones Newswires

05-31-08 1206ET