Oil prices at ‘right level’ for OPEC

June 11, 2014
Oil prices at ‘right level’ for OPEC



Oil prices are at a suitable level for OPEC members and the group sees no shortage in supply, UAE Energy Minister Suhail bin Mohammed Al-Mazroui was quoted as saying.

OPEC, which pumps more than a third of the world's oil, meets on Wednesday in Vienna to decide on output policy.

Ministers have said they expect that the 12-member group will leave its output target of 30 million barrels per day unchanged.

"Oil prices have been steady over the past period and at a comfortable level for all members," WAM quoted the minister as saying.

"The UAE and all of the OPEC members are committed to guarantee the balance in supply and demand and that consumers get the oil supplies that they may need," he told WAM before traveling to Vienna.

Oil reserves are still "acceptable" in most oil consuming countries and there is no shortage in supply, the minister added.

An oil price comfortably over $100 a barrel leaves smiling OPEC ministers with an easy task to leave things as they are on output policy at Wednesday's meeting.

Brent crude has stayed above that price, the preferred level of Saudi Arabia, all year and was trading near $110 on Tuesday, supported by the almost total loss of supplies from OPEC member Libya.

"The price is good. Brent is $110, it is not bad," said Angolan Oil Minister Jose de Vasconcelos.

"There is no reason for a change. Absolutely no reason," he said in Seoul.

"Supply is highly sufficient, demand is great and the market is fairly stable."

Riyadh kept production little changed in May, pumping 9.705 million barrels per day, according to industry sources, supporting Saudi Arabia's view that the market did not need more.

Kuwait expects OPEC to keep the oil production ceiling unchanged so as not to alter prices, said the country's Oil Minister Ali Al-Omair.

Asked if he believes the OPEC will decide to maintain current output at its regular meeting in Vienna this week, Al-Omair said: "I think yes."

Oil prices extended their gains in Asia as investors cheered robust economic data from the US, China and Japan, with the breakdown of initial Ukraine-Russia talks to avert a gas cut-off also boosting prices.

US benchmark West Texas Intermediate (WTI) for July gained 39 cents to $104.80 a barrel in afternoon trade after jumping $1.75 in New York on Monday.

Brent North Sea crude was up 14 cents to $110.13 for its July contract after leaping $1.38 in London trade.

"I think that all parameters lead to keeping the production as it is and this, of course, will be reflected in (oil) prices" remaining unchanged, the Kuwaiti minister said before leaving for Vienna.

He said he believes that by not changing the oil output ceiling, there will be no "big changes" in crude prices.

OPEC has steered a course around the loss of over a million barrels per day of oil from Libya.

Oil Minister Omar Shakmak said on his arrival in Vienna that output had fallen below 200,000 bpd, a fraction of Libya's 1.6 million bpd before the conflict.

He at least welcomed the oil price.

"This is positive for the market, it's for the benefit of producers and customers alike," Shakmak said.

OPEC's sanguine view of supply will run into a seasonal rise in demand later in the year, underpinned by signs of some global economic recovery.

OPEC itself has raised the demand for its crude for the year to 29.76 million bpd, snugly inside its ceiling but the International Energy Agency, representing the US and leading industrialized oil consumers, sees a tighter fit of around 30 million bpd.

The IEA in its May report said oil prices remained "elevated" and market balances called for a "significant rise" in OPEC production from current levels for the second half of the year.

As well as unrest in Libya, western sanctions on Iran have also cut OPEC supplies, but output recovered in May close to the 30 million bpd target as extra barrels from Iraq and Angola helped offset the unplanned reductions.

"With the current low price volatility, OPEC has no incentive to change anything when it also has to deal with the uncertainty of Libya and Iran," said Olivier Jakob, oil analyst at Petromatrix.

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