May 14, 2012 / 4:40 PM / 7 years ago

Arab Spring not over, oil to stay volatile: Mercuria

LONDON (Reuters) - Oil prices have found a long-term floor at $90-95 per barrel and nearby spot oil prices could rise sharply if Middle East tensions increase again, the co-heads of trading company Mercuria said on Monday.

Marco Dunand and Daniel Jaeggi, who together founded and run the Swiss-based energy and commodities trader, said prompt oil prices would continue to be vulnerable to worries over the conflict between Iran and the West, a confrontation that was likely to continue.

“The Arab Spring is not over,” Jaeggi told the 2012 Reuters Global Energy & Environment Summit.

“What is going on in Syria today is probably the opening chapter of a confrontation with Iran,” he said via video-link from Dubai. “We believe that this instability in the Middle East is likely to continue and set a floor for the oil price.”

“We appear to have found an anchor price since the end of 2009 where the long-term oil price is fluctuating in the $90 to $95 per barrel range,” Jaeggi said.

He said recent high oil prices should be sufficient to ensure adequate investment in oil supplies and explained the recent rapid increase in U.S. oil production, in particular the sharp increase in oil supplies from shale.

North Sea Brent crude oil averaged around $110 per barrel last year and reached a peak of more than $128 in March before declining gradually over the last two months as tensions in the Middle East have eased and oil supplies have increased.

Brent traded around $111 at 1530 GMT on Monday.

Geneva-based Mercuria, founded in 2004, has expanded rapidly from its base in crude and oil products trading and has now an annual turnover of around $80 billion with operations in energy and other commodities.

Mercuria is one of the world’s top five energy traders, moving almost 120 million tonnes of oil, coal and gas a year.

Mercuria President Marco Dunand told the Reuters summit that moves by key oil producers, including Saudi Arabia, over the last two months to supply more oil to the market, had helped move prices down from their peaks.

This had eased fears of a possible shortage in the market and of potential threats to oil supply “whether it is to the Gulf of Hormuz or elsewhere”.

“The oil producers have been acting for the last two months to supply more oil to the market, (so) the price premium attached to potential problems has fallen,” Dunand said.

Saudi Arabia Oil Minister Ali al-Naimi said on Sunday that the world’s biggest oil exporter wanted oil prices around $100 a barrel and would like to see global inventories rise before demand picks up in the second half of the year.

The kingdom pumped more than 10 million barrels per day (bpd) last month, more than a 30-year high, production that has been helping build oil inventories around the world.

Dunand said oil prices should keep falling as long as oil stocks were seen to keep rising.

“If you have more ample stocks, the market knows it can cope with shocks and the fear factor falls,” Dunand said. “If the market sees that stocks are continuing to increase, I think the market will get closer to the $100 that Naimi mentioned.”

“The danger is that if for some reason the geopolitical tensions in the Middle East start rising again, prices could very quickly go back up to where they were one-and-a-half-months ago,” Dunand said.

Reporting by Christopher Johnson; Editing by William Hardy; Follow Reuters Summits on Twitter @Reuters_Summits

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