DUBAI, 10 October 2007 — Qatar’s energy minister said crude oil prices, which have surged recently to record levels above $80 a barrel, should be more than $100.
“If we take into account inflation from 1972 to the present day, the real and fair price for oil should be more than $100,” Abdullah ibn Hamad Al-Attiyah said in remarks aired by Al-Jazeera television yesterday.
He said such a price was justified by rising inflation, a fall in purchasing power and the weakness of the dollar, which has dropped about 10 percent in value against the euro over the past year.
His comments contradict those of OPEC chief Abdalla Salem El-Badri who said in September that current prices around $80 did not reflect fundamentals and were unlikely to last long at that level.
The Organization of Petroleum Exporting Countries (OPEC) decided last month to increase its output by 500,000 barrels from Nov. 1 to help ease prices and send a signal that the group cared about consumer countries.
OPEC is due to meet again in Abu Dhabi on Dec. 5.
Attiyah, whose country is an OPEC member, said the dollar could remain the unit of reference for oil despite its slump. “But I cannot predict what will happen in future. Anything is possible,” he said.
Oil futures rose sharply yesterday after the US government predicted that a colder winter ahead will help lift worldwide demand for crude during the fourth quarter.
In a monthly report, the Energy Department’s Energy Information Administration estimated that global demand for oil will be 1.8 million barrels a day higher in the fourth quarter than it was during the same period last year. The report follows a prediction Thursday from the US National Oceanic and Atmospheric Administration that temperatures in the US will be 1.3 percent colder than last year, although they will be 2.8 percent warmer than average.
“Initially, traders are relying on the Energy Information Administration (report),” said Tim Evans, an analyst with Citigroup Inc. in New York.
However, Evans also said of yesterday’s trading, “I think there may (also) be a technical element to this.”
Oil prices declined more than $2 a barrel on Monday, and have been volatile in recent days. Analysts say investors are engaged in a battle over whether oil supplies are adequate to meet fourth quarter demand. Some investors feel prices have peaked for the year and are due to begin a seasonal decline, while others feel prices could rise again and set new records.
When prices held above $78 on Monday, that may have emboldened some of the more bullish investors to try to push prices to new highs, Evans said.
Light, sweet crude for November delivery rose $1.40 to $80.42 a barrel on the New York Mercantile Exchange, while gasoline futures rose 2.221 cents to $2.0223 a gallon.
November heating oil rose 2.03 cents to $2.1799 a gallon, while natural gas for November rose 5.9 cents to $6.905 per 1,000 cubic feet.
In London, November Brent crude rose 75 cents to $77.33 a barrel on the ICE Futures exchange.
Earlier yesterday, prices had fallen further as sentiment was hit again by the strengthening US currency, which makes dollar-denominated commodities more expensive for buyers using other currencies, analysts said. “Generally, a weaker dollar helps to push dollar denominated commodities higher,” said Andrey Kryuchenkov at the Sucden brokerage in London.
At the pump, meanwhile, gas prices slipped 0.2 cent on Monday night to a national US average of $2.765 a gallon, according to AAA and the Oil Price Information Service.
Retail prices have slid in recent weeks as consumer demand for gasoline has fallen.
In addition to reacting to yesterday’s EIA predictions about future demand, traders are anticipating Thursday’s EIA report on petroleum inventories.
Crude oil inventories are expected to have gained 1 million barrels in the week ended Oct. 5, according to a Dow Jones Newswires survey of analysts, while refinery use is expected to have fallen by 0.1 percentage point to 87.4 percent of capacity.
