KUWAIT, (Reuters) – Top exporter Saudi Arabia and other Gulf producers say surging oil markets are beyond their control and prices could spike higher unless tensions between the West and Iran subside.
Saudi Oil Minister Ali al-Naimi and OPEC Secretary General Abdullah al-Badri are expected to focus on high oil prices in their addresses to the International Energy Forum gathering of oil ministers and executives on Wednesday, several OPEC sources said.
“Volatility is a concern for us and it can only be resolved if the issue with Iran can be resolved,” said a Gulf oil industry source.
The Forum in Kuwait is one of the biggest gatherings of the oil industry bringing together producing and consuming nations, including the United States the European Union and members of the Organization of the Petroleum Exporting Countries.
Gulf OPEC oil ministers said they would prefer to see oil trading at around $100 a barrel, rather than current levels of $124 that they fear could hurt the global economy and lead to a repeat of a spike and subsequent collapse in oil prices in late 2008.
Oil prices climbed to 10-month highs and hit an all-time record in euros last month on concern over potential disruption to supplies of Iranian oil.
“Oil prices are on the high side but they are really reacting to what is happening in the Middle East,” UAE’s Oil Minister Mohammed bin Dhaen al-Hamli told reporters.
High oil prices have become a major headache for Western politicians heading for reelection this year, including United States President Barack Obama, due to fears they could hamper a fragile global economic recovery.
“It’s starting to hurt, we’re seeing signs,” said chief executive of oil major Total Christophe de Margerie.
OPEC’s lead producer Saudi Arabia holds most of the world’s spare production capacity but oil markets are increasingly worried it would not be enough to fill a supply gap created if Iranian oil exports are disrupted or if Iran reacts to western pressure over its dusputed nuclear programme by trying to close the vital Strait of Hormuz.
“The geopolitical tensions around the Gulf are much more real than before. I hope we will pass 2012-2013 without some kind of a flash point,” Shihab Eldin, OPEC’s former head of research, said.
Eldin said new oil supply capacity due to come online over the next few years could inflate the spare capacity cushion if diplomacy can stave off any conflict in the Gulf in the meantime.
“If at the moment spare capacity is a little bit on the low side, I think in a year or two you will see it back above average,” he said.