Market has enough supplies and producers don't want rising costs to destroy demand, says Al Hamli
“The market is well-supplied,” UAE Energy Minister Mohamed al Hamli said in Abu Dhabi on Monday. “Signs are coming, and they are positive, that there will be a gradual increase in demand.”
Producers in the Organization of Petroleum Exporting Countries are watching prices because they don’t want rising costs of crude to destroy demand, he said. “We don’t want to see demand adversely affected by high prices,” Al Hamli said, adding that prices don’t reflect oil market fundamentals.
Oil prices have risen in reaction to global events such as the uprising in Egypt that led President Hosni Mubarak to step down after three decades of rule, Al Hamli said. Brent crude, a benchmark for Europe and Africa, exceeded $100 last month.
There is a “decoupling” between prices for Brent and US benchmark West Texas Intermediate, Al Hamli said. This was because of “technical reasons,” including inventories in the US and the actions of traders, he said at an event to commemorate OPEC’s 50th anniversary.
Brent crude for April settlement climbed as much as $3.02 to $103.9 a barrel and was at $103.7 at 3:23 pm local time on the ICE Futures Europe exchange in London. WTI for March delivery on the New York Mercantile Exchange was at $86.3 a barrel, up 72 cents.
OPEC may boost supply as demand for crude rises along with a recovery in global economic growth to rates approaching those last seen before the financial crisis, Saudi Arabia’s Oil Minister Ali al Naimi said last month.
Al Naimi said in a speech in Riyadh Jan 24 that the policy of the 12 member group “is to meet any increase in oil demand to maintain the supply demand balance.” Worldwide demand for crude may increase as much as 1.8 million barrels a day, or 2 percent, from last year, he said. Saudi Arabia is OPEC’s biggest exporter and most influential member.
The UAE is producing 2.2 million barrels a day, within its OPEC quota, Al Hamli said. He said the UAE’s “sustainable” output capacity is 2.8 million barrels a day.
The International Energy Agency, which represents the interests of the world’s advanced economies, on Feb 10 raised its forecast for crude demand growth this year for a fifth consecutive month. Global consumption will rise in 2011 by 1.5 million barrels, or 1.7 percent, to 89.3 million a day, the agency said in its monthly report. The forecast equates with the low end of the demand increase Al Naimi said OPEC foresees.
Members of OPEC, which supplies 40 percent of the world’s oil, won’t meet until June to discuss production levels. The group agreed to a record 4.2 million-barrel-a-day cut in output in late 2008, as global demand fell 0.6 percent, the first decline since 1983. It’s compliance to this limit was at 44 percent in December, according to the IEA.
The group’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the UAE and Venezuela.