TOKYO: Gulf oil producers said yesterday they can tolerate moderate crude prices for longer to help revive global growth, but shared a concern with consumer nations that a prolonged period of low prices could sow the seeds of a future fuel price spike.
At a meeting with Asian oil consumer countries including Japan and China, the two sides agreed oil prices will need to rise eventually to support investment in production capacity to prevent prices getting out of control when demand rises again.
Middle East OPEC members said they were satisfied with oil at $50 a barrel or less while the economy was on the mend. That suggests Gulf producers may push OPEC (the Organization of the Petroleum Exporting Countries) to maintain a moderate stance when the group next meets on May 28 to decide output policy.
“I think this is very pragmatic, $40-$50 this is a pragmatic price for 2009,” said Qatari Oil Minister Abdullah Al-Attiyah.
Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi said $50 oil was Riyadh’s “contribution to the world economy.” US oil closed at $51.49 on Friday, having recovered from a December low of $32.40 after OPEC cut production to counteract falling fuel demand as the economy headed for recession. Both consumer and producer nations are concerned that cancelled and deferred oil production projects could leave supplies short when the economy recovers.
“When the market is getting tighter again and demand comes back and the economy is recovering, we may see a bigger problem,” said Nobuo Tanaka, executive director of energy consumer body the International Energy Agency.
“I have often cautioned that if prices remain too low for too long, they can carry the seeds of future price spikes,” said Al-Naimi. Saudi Arabia said in December that $75 a barrel was a fair price for both producers and consumers that would guarantee future supplies.
“In OPEC in general, we don’t think the current price level is the level that will avoid shortages in the future,” said Iraqi Oil Minister Hussain Al-Shahristani.
“The level should not be too high to impede economic recovery in the world, and at the same time it should not be too low as it is now to prevent investors developing new fields.”
The sentiment was echoed by OPEC Secretary-General Abdullah El-Badri in Algiers yesterday. He said an oil price of $50 per barrel is too low for OPEC producers to invest in production. Commenting on the prospect of further output cuts, El-Badri said: “It depends on the economic situation, but if we face any problem OPEC will not hesitate to take any further decision to stabilize the market.”
