OPEC members call for oil to rise to $100 a barrel
Published 15/10/2010 | 12:01
The 13pc decline in the Dollar Index since June has led some OPEC members to call for oil to rise to $100 a barrel.
The US currency’s weakness means the “real price” of oil is about $20 less than current levels, Venezuelan Energy and Oil Minister Rafael Ramirez said after yesterday’s meeting of the Organisation of Petroleum Exporting Countries in Vienna.
The group, which accounts for 40pc of global crude output, left targets unchanged and called for greater adherence to quotas, which are being exceeded by a supertanker load a day.
“OPEC is not interested in compliance right now,” Nordine Ait-Laoussine, the former Algerian oil minister who now runs Geneva-based consultant Nalcosa SA, said in an interview in Vienna.
“They’re concerned about the dollar because as the dollar weakens, prices go up. They’re not paying any attention to production discipline.”
The Dollar Index, which tracks the currency against those of six US trading partners, was at 76.48 at 11:08am in London today, near its lowest level since December, from a 2010 high of 88.405 on June 7. It has dropped 6.1pc in the past month.
The nominal value of OPEC’s net oil export revenue will be $818bn in 2011, 10pc more than this year, according to US Energy Department forecasts.
OPEC is exceeding its own quotas as prices rise above the $70-to-$80-a-barrel band that Saudi Oil Minister Ali al-Naimi said is “ideal.”
The International Energy Agency estimated that the group achieved 54pc of its promised supply cuts in September.
Shokri Ghanem, chairman of Libya’s National Oil Corp, said a higher crude price would help OPEC offset the loss of revenue from the weaker dollar.
“We would love to see $100 a barrel,” Ghanem said yesterday in Vienna. “We’re losing real income. Libya in particular would like to see a higher oil price.”
Kuwaiti Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said in an interview this week that $70 to $85 is the “most comfortable” range, while his Algerian counterpart, Youcef Yousfi, said between $90 and $100 is “reasonable.”
Crude for November delivery rose 3 cents to $82.72 a barrel in electronic trading on the New York Mercantile Exchange today, paring yesterday’s 0.4pc decline. Oil gained 9pc in the past month.
“So far, the perfect price has been $60 to $80, and now they’re talking about $80 and $100,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “This all tells me OPEC is quite happy with higher prices and quite unhappy with the fall in the US dollar.”
Speculation that the Federal Reserve may further loosen monetary policy through so-called quantitative easing has weakened the dollar.
Fed Chairman Ben Bernanke said October 4 the central bank’s first round of large-scale asset purchases aided the economy and further buying is likely to help more.
OPEC kept its production target at 24.845 million barrels a day at its meeting yesterday.
Output from the 11 members bound by quotas exceeds the group’s ceiling by 1.9 million barrels a day, or about the same as produced by Nigeria or Angola, according to Bloomberg estimates.
While ministers talked of the need for greater adherence, OPEC no longer even publishes the individual national targets. The group quota “is all you need to know,” OPEC Secretary- General Abdullah El-Badri said at a press conference yesterday.
The group agreed to a record 4.2 million barrel-a-day cut in production in late 2008 as global demand fell 0.6pc, the first decline since 1983. Compliance reached a peak of 79pc in March 2009, based on Bloomberg data.
“The market is well supplied,” Al-Naimi said yesterday. “It is an ideal situation we are in now. Nobody is complaining. Consumers are happy, producers are happy. Companies are investing.”
Oil consumption worldwide will average 86.9 million barrels a day in 2010 and 88.2 million barrels a day in 2011, the Paris- based IEA said October 12 in its monthly report. That’s 300,000 barrels a day more than last month’s forecast for both years.
The IEA raised its estimate of the amount of oil OPEC producers will need to provide to balance world supply and demand. Its new estimate is an average of 29.3 million barrels a day for next year, or 100,000 barrels a day more than the agency’s estimate for 2010.