ROME (Reuters) – OPEC members Saudi Arabia and Libya are confident oil prices will keep rising to eventually hit $75 a barrel, but acknowledged it would not be any time soon as a weak world economy keeps a lid on demand.
Libya said oil demand could rise by the third quarter if the U.S. economy recovers, but top oil producer Saudi Arabia fretted about weak demand outside Asia as it urged OPEC to “stay the course” when it meets on May 28.
Libya’s top oil official said the recent rise in prices appeared to be at least partly driven by speculation rather than fundamentals, a warning that came as the United States urged OPEC to avoid volatility that could slow an economic recovery.
“It is not the fundamentals that’s moving the market because there is a lot of overhang in the market,” Libya’s Shokri Ghanem said on the eve of a meeting of the Group of Eight energy ministers. “The return of the speculators seems to me to be a force in the market.”
He said oil prices would ultimately hit $75 per barrel — the level producers say is needed to encourage investment in new production over the long term — but not very soon.
Saudi Arabian Oil Minister Ali al-Naimi also said oil prices would “eventually” hit $75 per barrel but cited weak demand as a problem.
“The problem is the market. Demand is only in one place, in Asia, that’s all,” Naimi was quoted as saying by Platt’s oil agency.
He urged OPEC to “stay the course” when it meets on May 28. The group is expected to stick to its current production targets, but stress the need for full compliance with them, a senior Gulf source has previously said.
Ghanem said it was too early to say what OPEC would decide at the Vienna meeting but said compliance to quotas by OPEC members was good.
“Compliance is good, there are no complaints, it’s almost 80 percent,” he said.
Some sources have estimated compliance had slipped below 80 percent. OPEC’s latest monthly report pegged it at 77 percent.
Oil rallied to a six-month high of more than $60 a barrel this week, almost double last December’s low and well above the $50 level top exporter Saudi Arabia has said it could live with to help nurse the world economy back to growth.
U.S. Energy Secretary Steven Chu, who met Naimi in Rome, said it was in the producer nations’ interest as well to prevent a spike in prices that would dampen oil demand.
“I think what the world wants is stable oil prices,” Chu told reporters after signing a deal on clean coal and carbon capture and sequestration technologies with G8 host Italy.
“Another spike in oil will certainly have very big consequences in terms of the world economy recovery.”
The United States — the world’s largest oil consumer — in the meeting with Naimi stressed the importance of avoiding price volatility just as governments take steps to put the economy on the road to recovery, the U.S. Energy department later said.
OPEC last changed supply targets in December, when it cut a record 2.2 million barrels per day (bpd) as it raced to match plummeting demand for fuel from an economy in recession.
Just after the December OPEC meeting in Algeria, the oil price dropped to $32.40, its lowest since early 2004.
In total, the group that supplies around a third of the world’s oil has pledged to cut 4.2 million bpd — or around five percent of global supply — from last September’s output levels.
The G8 energy meeting on Sunday and Monday aims to define a joint strategy to tackle climate change, promote investment in new energy projects and dialogue between producers and consumer nations, as well as boost energy resources in poorer countries.