Oil finds $100 floor on Saudi politics, output cost
Saudi set $75 a barrel "fair price" when economy weak while Bullish Goldman sees marginal output cost as $100 a barrel. Meanwhile, Former Saudi oil minister says oil prices could leap to $200-$300 a barrel if Saudi Arabia is hit by serious political unrest.
April 5, 2011 12:18 by Reuters
Oil prices may have found a new floor around $100 a barrel, supported by rising production costs and higher budgetary requirements in Saudi Arabia, the only country holding any significant spare production capacity.
With oil also finding support from a return to stronger global economic growth, crude markets may have a more lasting justification for price strength than Arab world unrest.
The $100 floor for Brent crude compares to the $75 a barrel “fair price” for producers and consumers identified at the end of 2008 by leading OPEC nation Saudi Arabia.
For a while that served as a guide to markets of when Saudi Arabia, as effective head of the Organization of the Petroleum Countries, might alter supply to manage prices.
Even late last year, before rebellion in Libya saw prices rocket to a two-and-a-half-year high of $120 a barrel, OPEC was finding reasons why it should not try to anchor prices at $75.
Brent last traded below $100 on Feb 8 and was above $119 on Monday, taking its year-to-date average for 2011 to almost $106 a barrel, ahead of 2008’s record annual average of $98.52.
Unrest across the Middle East means Saudi Arabia’s focus is no longer on the need to moderate prices to shore up long-term demand and appease the world’s biggest oil consumer the United States.
Its attention is on issues closer to home — countering unrest among the Shi’ite minority that populate the oil-producing Eastern Province.