Cairo talks to centre on what price can be met by global economy, as oil nears two-year peak
OPEC ministers began arriving in Cairo on Thursday ahead of talks expected to
broach how high an oil price the world economy can stand as the market hovers
near two-year peaks above $90 a barrel.
full conference of the Organization of the Petroleum Exporting Countries
earlier this month elected to make no change to an output policy it has stuck
to since December 2008.
then oil has maintained a more than 30 percent rally from this year's low
struck in May and this week scaled a high of $90.80 the steepest in two years.
Organization of Arab Exporting Countries (OAPEC) brings together the Arab
members of OPEC, including top exporter Saudi Arabia, which has traditionally
been viewed as a price moderate.
began arriving on Thursday in time for Saturday's meeting when they will not
take any formal decision on output, but can still discuss production and price.
have said the likelihood is OPEC will begin to produce more oil, although first
of all by informally pumping in excess of agreed limits rather than through a
think we are going to see more production because oil is above $90," said
Patrick Armstrong of London-based Armstrong Investment Managers.
market could easily go for $100 because we're starting to see more commodities
allocation to preserve the real value of investment portfolios, but I don't
think we're going to see scenarios for spikes."
Arabian Oil Minister Ali Al Naimi said at the start of November consumers were
looking for prices in a $70-$90 range.
later reiterated a view the kingdom has held for two years that $70-to-$80 was
the best range for producers and consumers, ensuring enough revenue to generate
investment in new supply while avoiding the economic damage that could destroy
others in the group have pressed for a higher price, arguing quantitative
easing and a weakened US dollar that has spurred gains across financial
markets mean the oil price strength is partly nominal.
Quito earlier this month, OPEC Secretary General Abdullah al-Badri said OPEC
would base any change in policy on fundamentals of supply and demand, rather
than price alone.
it goes to $100 due to speculation, OPEC will not move," Badri said.
record output cut of 4.2 million barrels per day agreed in December 2008 leaves
plenty of room for informal adjustments.
group's adhesion to its agreed targets stands at 56 percent, a Reuters survey
discipline reached record levels in the first part of 2009 when the producer
group worked hard to shore up a market that had crashed down to just above $30
a barrel after hitting the July 2008 record of nearly $150.
anticipated increase in oil demand next year is expected to take absolute
consumption to a new high, but analysts are still careful to draw a distinction
between the current market and the protracted bull run that began at the start
of the decade and culminated in the 2008 record.
rate of demand growth next year has been pegged at 1.5 million bpd, only half
the 2004 peak, according to data from the International Energy Agency, of 3
the same time, OPEC spare capacity is ample at several million barrels per day,
and crude inventories in the world's biggest oil consumer the United States are
still above year-ago levels, even after a sharp drop reported this week.