CANCUN, Mexico (Reuters) - OPEC officials on Tuesday appeared undecided on how to respond if oil prices rose definitively above the $70-80 a barrel range they have praised this month, highlighting a looming challenge for the cartel.
Although prices have held calmly within this band for much of 2010, U.S. crude, currently around $82 a barrel, is near the top of its recent range, and some analysts said it could push even higher as demand from the United States and other industrialized nations rebounds as their economies recover.
Some major consumers at the biannual International Energy Forum (IEF) agreed with OPEC members’ claims the $70-80 price was good for both sides, providing sufficient revenues for producers and incentives to build new projects but not so high as to choke off growth in importing nations.
But there was no sign of a clear consensus by OPEC members at what price they would ramp up production if prices broke above the band Saudi Arabian Oil Minister Ali al-Naimi this week called “most appropriate”.
“Prices above $85 for a sustained period of time could well be harmful. We have to be aware that the economic recovery is still fragile,” an OPEC delegate told Reuters on the sidelines of the forum, which is aimed at promoting dialog between oil consumers and producers.
Naimi did not respond to questions about whether $85 a barrel would mean a rise in output. Asked the same question, a person familiar with Saudi thinking said simply: “No.”
Algerian Oil Minister Chakib Khelil stressed that oil markets could sustain the current oil price for six months to a year, and that OPEC had no specific target price that would trigger an increase in production.
Some members of the cartel aren’t waiting for a policy decision to gradually step up production. Total supply from OPEC’s 11 members rose by 200,000 barrels per day (bpd) in March, taking compliance with supply curbs agreed in December 2008 to just about 50 percent, a Reuters survey found.<O/OPEC>
“I‘m not very happy with that percentage,” OPEC Secretary General Abdullah al-Badri said on Monday, pinpointing OPEC compliance last month at 54 percent.
The IEF aims to produce a statement when the meeting concludes on Wednesday outlining measures to minimize oil volatility, including steps to increase market transparency, after price swings from a record high near $150 a barrel to below $33 in 2008 hit the economies of producers and consumers.
From the consumer’s perspective, Holland’s Energy Minister Maria van der Hoeven said $70-80 a barrel as fair, while Italy’s Minister of Economic Development Claudio Scajola said $60-70 a barrel was a good.
But Japan’s trade minister, Masayuki Naoshima, said that while producers had a consensus around $80 a barrel, consumers had not agreed on a price.
The U.S. Deputy Secretary of Energy Daniel Poneman said that fundamentals were better suited than targets to determine prices.
Rex Tillerson, chief executive of ExxonMobil (XOM.N), said the biggest U.S. oil company was less troubled by volatility, citing the firm’s history of making long-term investments.
“For us it’s really not a daunting issue,” he told reporters during a press briefing.
Reporting by Robert Campbell, Scott Haggett, Anna Driver and Joshua Schneyer; writing by Matthew Robinson, Editing by Alden Bentley