OPEC "stays the course", hopes for high prices

VIENNA (Reuters) - OPEC ministers on Thursday held output steady and instead bet on economic growth and recovering demand to drive an oil market that leapt to a six-month high above $65.

"Stay the course, this is the decision," Saudi Oil Minister Ali al-Naimi told reporters following just under two hours of talks, which had been widely expected to maintain existing production targets.

Some members of the 12-member Organization of the Petroleum Exporting Countries voiced concern high levels of inventory could depress prices, but Naimi said demand was rising and would drain away excess supplies.

"The price is good, the market is in good shape, recovery is under way. What else could we want?" he said.

U.S. oil futures on Thursday struck a six-month high of $65.23, more than double levels plumbed in December.

Naimi said the world was ready to cope with oil at $75-$80 a barrel and predicted it could reach that level before the end of the year, although other ministers said it could take longer than that.

Oil at $75-$80 is the price producers say is needed to sustain investment in new supplies for the long term.

Following its previous meeting in March, when prices were still below $50 a barrel and inventories were already very high, OPEC had signaled it was willing to live with prices around that level while the world economy gathered strength.

MERRY IN MAY

The mood of the May meeting was much more upbeat.

"I believe that the spirit of our final communique is sending a signal of optimism that all members of the organization are currently feeling," Angolan's Oil Minister Jose Botelho de Vasconcelos, who is also OPEC president, said.

"This optimism is coupled with some realism."

The United States, the world's biggest economy and biggest energy consumer, has cautioned too high an oil price could be financially painful, although U.S. President Barack Obama said his country had "stepped back from the brink."

Obama and Saudi King Abdullah were expected to discuss oil prices at a meeting next week in Riyadh.

The last time OPEC changed its output targets -- which stand at a total of 24.84 million barrels per day for the 11 OPEC members with output restrictions -- was at its December meeting in Algeria.

In all, OPEC has lowered output by 4.2 million bpd and has implemented around 80 percent of the promised cuts, estimates by secondary sources have found.

Ministers said Thursday's meeting had urged tougher compliance, but few analysts expected discipline to get tighter and noted it was already historically high.

The more bearish in OPEC have said rising oil prices could lead to a false sense of security and an unraveling of OPEC discipline, especially as OPEC members, such as Venezuela and even the OPEC president Angola, have taken issue with their output targets.

"Now the prices are going up, people are more likely to increase production and this could have a negative effect on prices," a delegate told Reuters.

A measure keenly watched by OPEC is inventories translated into days of forward demand cover.

According to the International Energy Agency, they equate to 62.4 days, the most since 1993, but Naimi has predicted rising demand would push them back to the equivalent of 52-54 days.

OPEC will next review its output policy at its ordinary meeting on September 9.

(additional reporting by Rania El Gamal and Henrique Almeida; Writing by Barbara Lewis; Editing by Sue Thomas)