Saudi still favors $70-$80 oil, OPEC holds supply

Monday, 13 December 2010 00:01 -     - {{hitsCtrl.values.hits}}

Quito (Reuters): Leading OPEC producer Saudi Arabia said on Saturday it still favored a $70-$80 price range for oil, a restatement of a two-year-old policy that will be welcomed by consumer nations worried that rising oil prices may get out of control and hamper global economic recovery.

Saudi Oil Minister Ali al-Naimi told reporters at an OPEC meeting in Quito: “$70-$80 is a good price.”

The comments came as the Organization of the Petroleum Exporting Countries agreed, as expected, to keep production restraints unchanged, despite a recent surge in crude prices to $90 a barrel.

With OPEC’s next meeting not scheduled until June 2, markets are likely to test Saudi Arabia’s resolve to keep prices below $80.

“The real issue here is whether additional supplies will be added,” said Lawrence Eagles, global head of oil research at JP Morgan in New York. “Minister Naimi said $80 was the top end of the range; let’s see if he follows up with higher supplies.”

U.S. crude closed at $87.79 a barrel on Friday having touched a two-year high of $90.76 earlier in the week.

Saudi, OPEC’s most influential producer, is likely to face opposition to any change in policy from other members who argue that demand is not strong enough to warrant more oil and that speculators are to blame for driving prices up.

Price hawk Venezuela called for $100 oil and said OPEC should not lift output again through the end of 2011.

“We believe that the market should compensate high production costs. $100 appears to be an adequate price,” said Venezuelan Oil Minister Rafael Ramirez.

Iranian Oil minister Massoud Mirkazemi said global oil demand was “not good” and that “nominal prices are good, real prices are not.”

Riyadh may decide the best way to stop prices rising further is to quietly lift supplies to buyers through its monthly sales process rather than via OPEC policy.

“When you have Venezuela saying $100 is adequate and Iran saying demand is weak even as it skyrockets, I think if they (the Saudis) don’t want a confrontation they will quietly supply more to the market,” said Edward Morse, Managing Director at Credit Suisse in New York.