CAIRO (Reuters) - Two key OPEC ministers hailed oil prices as “fair” on Thursday, showing little inclination to pump more crude to prevent oil prices that have rallied to more than a two-year high over $91 a barrel from stifling the global economic recovery.
Arab OPEC ministers are meeting in Cairo this weekend, just weeks after a full conference of the Organization of the Petroleum Exporting Countries elected to make no change to an output policy it has stuck to since December 2008.
Since then oil has extended a rally that’s boosted prices by more than 30 percent from this year’s low struck in May. U.S. crude on Thursday rose $1.03 to settle at $91.51 a barrel, the highest price since October 7, 2008.
The Organization of Arab Exporting Countries (OAPEC) brings together the Arab members of OPEC including top exporter Saudi Arabia, which has traditionally been viewed as a price moderate, as well as non-OPEC countries Tunisia, Egypt, Syria and Bahrain.
Ministers began arriving on Thursday in time for Saturday’s meeting when they will not take any formal decision on output but can still discuss production and price.
Libya’s top oil official appeared unconcerned by the latest rally, which comes as fundamentals turn more positive and investors factor in an improving economic outlook for next year.
“About $100 would be a fair price for the time being,” Libyan National Oil Corporation Chairman Shokri Ghanem told Reuters. He said it was too early to talk of changes to oil output.
Kuwait’s oil minister Sheikh Ahmad al-Abdullah al-Sabah told Reuters there was no plan to raise output, which was at a fair level, and that $85-90 per barrel was an acceptable price.
Analysts say higher prices are likely to encourage OPEC to produce more oil, although first of all by informally pumping in excess of agreed limits rather than through a policy change.
“I think we are going to see more production because oil is above $90,” said Patrick Armstrong of London-based Armstrong Investment Managers.
“The market could easily go for $100 because we’re starting to see more commodities allocation to preserve the real value of investment portfolios, but I don’t think we’re going to see scenarios for spikes.”
Saudi Arabian Oil Minister Ali al-Naimi said at the start of November consumers were looking for prices in a $70-$90 range.
He later reiterated a view the kingdom has held for two years that $70 to $80 was the best range for producers and consumers, ensuring enough revenue to generate investment in new supply while avoiding the economic damage that could destroy demand.
But others in the group have pressed for a higher price, arguing quantitative easing and a weakened U.S. dollar .DXY that has spurred gains across financial markets mean the oil price strength is partly nominal.
In Quito earlier this month, OPEC Secretary-General Abdullah al-Badri said OPEC would base any change in policy on fundamentals of supply and demand, rather than price alone.
“If it goes to $100 due to speculation, OPEC will not move,” Badri said.
OPEC’s record output cut of 4.2 million barrels per day agreed in December 2008 leaves plenty of room for informal adjustments.
Its members have only delivered around half of their promised cuts, a Reuters survey found. <OPEC/O>
OPEC stuck closest to its output limits in the first part of 2009 when it worked hard to shore up a market that had crashed down to just above $30 a barrel after hitting the July 2008 record of nearly $150.
An anticipated increase in oil demand next year is expected to take absolute consumption to a new high, but analysts are still careful to draw a distinction between the current market and the protracted bull run that began at the start of the decade and culminated in the 2008 record.
The rate of demand growth next year has been pegged at 1.5 million bpd, a Reuters poll showed, only half the 2004 peak, according to data from the International Energy Agency, of 3 million bpd.
At the same time, OPEC spare capacity is ample at several million barrels per day, and crude inventories in the world’s biggest oil consumer the United States are still above year-ago levels, even after a sharp drop reported this week. <EIA/S>
Writing by Barbara Lewis; editing by Tom Pfeiffer and William Hardy;editing by Sofina Mirza-Reid