DAVOS, 24 January 2004 — Leading OPEC producer Saudi Arabia yesterday gave a categorical assurance that it is not targeting higher oil prices to counter the decline in the value of the dollar.
Minister of Petroleum and Mineral Resources Ali Al-Naimi told delegates to the World Economic Forum in Davos that the Kingdom would continue to aim for a central $25 target for a reference basket of OPEC crudes, well below its value now of $30.70 a barrel. “I think a price of $25 a barrel for the OPEC basket is the right price,” Naimi said.
“In OPEC in general and Saudi Arabia in particular we would like to see prices between $22-$28, as near as possible to $25, and to stay there. That is a goal,” said Naimi.
The comments appear to signal a softening of policy from late last year when Naimi said higher oil prices were warranted because of the slump in the dollar, the currency of international oil trade, against other major currencies. Earlier this week, Crown Prince Abdullah, deputy premier and commander of the National Guard, in a rare statement on oil prices, said the Kingdom did not want to harm its trading partners and wanted price “moderation.”
OPEC introduced a $22-$28 target range for its crude in 2000 but ministers started to express worries about the impact of the dollar’s decline on group members’ purchasing power when they last met in December.
Naimi declined to predict what decision OPEC might take when it meets Feb. 10 to discuss output policy for the second quarter.
Senior OPEC delegates said this week that a production cut, thought likely until recently, was now highly unlikely because of high prices and lower-than-expected inventories.
Given Naimi’s insistence on $25 a barrel, it appears only a heavy price slide before the February meeting would trigger a cut.
World oil demand dips in the second quarter after peak northern hemisphere winter consumption.
Oil prices in January hit a post-Iraq war high, buoyed by a severe spell of cold weather in the United State and strong demand from China. US light crude yesterday was up 17 cents at $35.10 a barrel.
Prices have found support from hedge fund speculators making a big push into oil and other commodities.
Naimi said the dollar’s weakness had encouraged investors to divert cash into oil.
“The fall in the price in the dollar is actually what is driving the price of oil up,” said the Saudi minister. “The reason is the speculators who were in currencies have moved from currencies to commodities and they drove the price up.”
