VIENNA, 2 April 2004 — Saudi Arabia’s Foreign Minister Prince Saud Al-Faisal said yesterday that oil prices are set to fall to a range of $25-$28.
“We think the prices will continue to go down until they reach a range of 25 to 28 dollars,” said the prince, who is accompanying Crown Prince Abdullah, deputy premier and commander of the National Guard, on a state visit to Austria. The Organization of Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the main member as the world’s largest oil exporter, has a target price range of $22-$28 per barrel.
Oil prices showed mixed fortunes yesterday as OPEC began cutting production by one million barrels per day (bpd).
The price of benchmark Brent North Sea crude oil for May delivery rose four cents per barrel to $31.55 in London trading. New York’s reference light sweet crude May contract lost 66 cents to $35.10 in early deals.
In Vienna on Wednesday, OPEC had agreed to a four-percent reduction of its official crude oil production to 23.5 million barrels per day from April 1.
“There is an excess of supply in the market,” Al-Faisal told journalists.
Asked whether Washington had put pressure on Saudi Arabia to change its position on the oil organization’s output, he said: “No, they haven’t.” “Since we reduced production in OPEC, prices went down. This reflects the veracity of Saudi Arabia’s position that there is excess capacity on the market rather than shortages,” Al-Faisal said. He said shortages in the market were due to “infrastructure” problems in some countries.
Following confirmation of OPEC’s cut, the US Department of Energy Wednesday reported a rise in commercial crude oil stocks of 5.7 million barrels to 294.3 million in the week to March 26. The US government also said US gasoline, or petrol, stocks had risen by 1.4 million barrels to 200.9 million.
Analysts had forecast an increase of 0.9 million barrels in crude stocks and a fall of one million barrels in gasoline.
Recent declines in gasoline inventories have worried the market because American drivers traditionally consume gas in the northern hemisphere’s summer when vacationers take to the roads. OPEC is meanwhile worried that demand for crude oil will fall with the arrival of spring in the northern hemisphere and that it must act now to cut production to prevent a price collapse.
Nigeria’s top oil official also said OPEC could raise its output at the next full ministerial meeting scheduled for June. “If the market dictates that we increase production, we will be happy to do it,” Presidential Adviser on Petroleum Edmund Daukoru told reporters.
