QUITO, (Reuters) – Leading OPEC producer Saudi Arabia said on Saturday it still favored a $70-$80 price range for oil, a restatement of a two-year-old policy that will be welcomed by consumer nations worried that rising oil prices may get out of control and hamper global economic recovery.
Saudi Oil Minister Ali al-Naimi told reporters at an OPEC meeting in Quito: “$70-$80 is a good price.”
The comments came as the Organization of the Petroleum Exporting Countries agreed, as expected, to keep production restraints unchanged, despite a recent surge in crude prices to $90 a barrel.
With OPEC’s next meeting not scheduled until June 2, markets are likely to test Saudi Arabia’s resolve to keep prices below $80.
“The real issue here is whether additional supplies will be added,” said Lawrence Eagles, global head of oil research at JP Morgan in New York. “Minister Naimi said $80 was the top end of the range; let’s see if he follows up with higher supplies.”
U.S. crude closed at $87.79 a barrel on Friday having touched a two-year high of $90.76 earlier in the week.
Saudi, OPEC’s most influential producer, is likely to face opposition to any change in policy from other members who argue that demand is not strong enough to warrant more oil and that speculators are to blame for driving prices up.
Price hawk Venezuela called for $100 oil and said OPEC should not lift output again through the end of 2011.
“We believe that the market should compensate high production costs. $100 appears to be an adequate price,” said Venezuelan Oil Minister Rafael Ramirez.
Iranian Oil minister Massoud Mirkazemi said global oil demand was “not good” and that “nominal prices are good, real prices are not.”
Riyadh may decide the best way to stop prices rising further is to quietly lift supplies to buyers through its monthly sales process rather than via OPEC policy.
“When you have Venezuela saying $100 is adequate and Iran saying demand is weak even as it skyrockets, I think if they (the Saudis) don’t want a confrontation they will quietly supply more to the market,” said Edward Morse, Managing Director at Credit Suisse in New York.
OPEC agreed its biggest ever supply curbs at the end of 2008 after a price collapse from $147 to just over $33 caused by a recessionary drop in fuel demand. It has not changed policy since.
Many OPEC ministers say supplies are sufficient and that they will only open the taps to meet extra demand.
“Once there is a shortage in the market, or once we feel there is a shortage in the market, we of course will increase production but it is not just a function of the price,” Libya’s head of delegation Shokri Ghanem said.
“If prices go high because of speculation we can do nothing about it,” said Secretary-General Abdullah al-Badri.
“When you go to buy oil and you cannot find it, that’s when OPEC will interfere and solve it.”
Inventories held among the industrialized nations of the OECD are high at 60 days of forward demand.
But the International Energy Agency, adviser to consumer nations, said on Friday that world demand, bolstered by an early winter cold snap, is rising more quickly than expected.
Extra demand has flattened the oil futures price curve and reduced the discount for prompt crude, cutting the incentive for traders to store oil, likely meaning inventories will start dropping.
Eagles at JP Morgan said: “Really these (OPEC) comments underscore that OPEC wants lower inventories, and if it thinks the market will allow that to happen without higher prices it is mistaken.”