TEHRAN (Reuters) – Oil producers are pumping too much oil to the market and a price under $100 is too low, Iran’s oil minister said on Saturday.
Members of the Organization of the Petroleum Exporting Countries (OPEC) should respect their output targets to prevent oversupply from worsening, Oil Minister Gholamhossein Nozari said.
High fuel prices and the wider economic crisis have eaten into oil demand in the United States and other big consuming countries. Concern about slowing demand has knocked U.S. oil to around $93 a barrel from a peak of over $147 struck in July.
“$100 and below is not suitable for oil producers or oil consumers,” Nozari told reporters at an energy conference in Iran’s capital.
But Nozari said he did not expect OPEC ministers to meet to discuss oil policy ahead of their next scheduled gathering in December in Algeria.
Producers were pumping around 400,000 barrels per day (bpd) more oil than the market needed, Nozari said. If OPEC members did not stick to the group’s formal output targets, oversupply could triple by the first quarter of 2009, he added.
“With the OPEC decision to cut, oversupply could be controlled in the first quarter of 2009,” Nozari said. “But if they (OPEC members) do not carry out the cut, oversupply could reach 1.2 million bpd.”
OPEC, source of more than a third of the world’s oil, agreed in September to trim output. The producer group called for members to comply more strictly with output targets, a move officials said would cut supplies by around 500,000 barrels per day.
OPEC’s 12 members bound by targets reduced output by 220,000 bpd in September from August, a Reuters survey found. But the group was still pumping at 30.18 million bpd, over 500,000 bpd above target.
Top oil exporter Saudi Arabia is the member pumping most above its quota, so would shoulder most of the reduction.
Iran, the world’s fourth-largest oil exporter, is among the members of OPEC that need high oil prices to balance its budget.
Nozari had previously said $100 was the lowest appropriate price for a barrel of crude.
Anything below that level would slow investment in high-cost projects to boost oil output, which would reduce future supply and hurt consumers in the long run, Iran’s OPEC Governor Muhammad Ali Khatibi has said.
Recent oil price fluctuations were due global economic problems, Nozari said on Saturday.
“I think the main reason for the volatility is because of international economic crisis,” Nozari said.
U.S. crude fell on Friday as concern about a slowing economy outweighed relief after the world’s largest energy consumer passed a rescue bill for its financial sector.