Saudi’s Al-Naimi expects oil to remain at $70-$80 a barrel
Oil prices between $70 - $80 a barrel, “is delivering the revenue we need,” said Al-Naimi.
June 8, 2010 9:44 by Rasha Reslan
Oil prices would stay in the “ideal realm” of $70 to $80 a barrel, a level seen fair by consumers and producers and defended by oil market investors, Saudi Arabia’s oil minister said in remarks published on Monday.
US crude traded near $72 on Monday. It has dipped below $70 and traded above $80 in the past month according to sentiment across financial markets on the global economic recovery.
Top oil exporter Saudi Arabia has pegged $75 as a level that is high enough to encourage investment but low enough to stimulate growth.
“I think that the price will stay in this ideal realm of $70-80 a barrel,” Minister of Petroleum and Mineral Resources Ali Al-Naimi said in an interview published by consultancy Petroleum Policy Intelligence. “There was a general consensus (between producers and consumers) that this is a fair price.”
The targeted price had also gained acceptance among oil market investors, the minister of OPEC’s largest producer said.
“There is much more than OPEC involved in the picture,” he said. “I think investors, speculators, hedge funds, currency and commodity funds are looking at these prices very carefully and trying to keep it there.”
If the price went to around $50 then all producers would lose out on revenue, but non-OPEC producers would hurt the most as they were forced to shut down more expensive oil production, Al-Naimi said in the interview, conducted on May 18 when oil prices settled under $70.
A price of between $50 and $60 would lead to louder calls from OPEC members to comply with existing agreed curbs, Al-Naimi said.
The producer group has kept output targets unchanged since agreeing record curbs of 4.2 million barrels per day (bpd) in late 2008. Higher prices since then had encouraged some members to informally boost output, and the group’s output rose to a 17-month high in May, according to a Reuters survey.
Saudi Arabia had kept output steady at its OPEC target of 8.05 million bpd, Al-Naimi said.
“We have no reason to overproduce because we have a commitment to OPEC and $70-$80 is delivering the revenue we need,” he said.
“We don’t want the price to be depressed, and we don’t want it to shoot up. Saudi Arabia has always stood for moderation as a principle in all our affairs and transactions. Moderation is the name of the game as (Custodian of the Two Holy Mosques) King Abdullah has said many times.”
Al-Naimi said he expected economic growth in Asia and the Middle East to continue. The regions are expected to provide the bulk of energy demand growth in coming years as developed countries struggle to emerge from recession and adopt policies that promote energy conservation and supply from alternative sources.
Still, even demand from developed economies appeared to be improving, Al-Naimi said. Oil stocks in those countries were also declining, he added.
When asked if the balance of supply and demand was acceptable in the short term, Al-Naimi replied “absolutely”.
“There is hype that the market is oversupplied,” he said. “That people are renting Very Large Crude Carriers (to store crude), but look at the latest data…for the three areas Japan, EU and North America – oil stocks went down by more than 20 million barrels.”
OPEC is next scheduled to meet to discuss oil supply policy in October.