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Sat 13 Dec 2008 01:53 PM

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Real price for crude above $100 - Iran

Islamic Republic's oil minister says OPEC needs to cut oversupply from market to support falling prices.

Iran's oil minister said he considered the "real price" for a barrel of crude should be more than $100 and a senior Iranian official said OPEC needed to cut oversupply from the market, Iranian media reported on Saturday.

Oil minister Gholamhossein Nozari's comments were made to an Iranian newspaper ahead of Wednesday's meeting of OPEC ministers in Algeria, where they are expected to announce a fresh output cut to add to recent curbs totalling two million barrels per day (bpd).

Saudi Arabia has said $75 a barrel was a fair price, comments echoed by an Iranian official this month. Other officials in the Organisation of the Petroleum Exporting Countries have said OPEC states needed $70 to $80 a barrel.

International oil prices, meanwhile, are now more than $100 below their July peak, trading around $46 on Friday.

"In my view, the real price for every barrel of oil must be above $100," Nozari told Poul newspaper in an interview.

The minister of OPEC's second biggest producer added: "We have never set a definite price for oil and we have always called for prices to reach their real level. Our policy in OPEC has also been based on this."

Iran has traditionally been hawkish on prices and economists say the country needs prices to bounce back to around $80 a barrel to avoid a spending squeeze in next year's budget.

Asked about comments by some of his managers who have said prices between $70 to $80 were desirable, Nozari said: "This might also be a kind of strategy." He did not elaborate.

Nozari said oil prices that were too low would hurt consumers by deterring investment in crude production.

"We believe that if prices do not attain the real level, consumers would incur more losses than producers since the desire for investment in the oil industry will drop with the disruption in balance between output and consumption," he said.

Iran's OPEC governor, Mohammad Ali Khatibi, said OPEC needed to cut oversupply and it needed support from non-OPEC producers.

The depth of the price fall has focused all producers on the need for action. Russia, the biggest non-OPEC exporter, is sending senior officials to the Algerian OPEC talks.

"In order to get out of the existing condition, we have to remove oversupply from the market so that [the market] would be balanced. Once it is balanced, we would have desirable prices," Khatibi told the oil ministry's news website SHANA.

"OPEC countries are in agreement with this policy and that is why we need to get support from non-OPEC for this policy."

Iran and others have said in the past that OPEC cuts could be undermined if non-OPEC oil producers did not cooperate.

Khatibi said the Algeria meeting would discuss OPEC's move to reduce output by 1.5 million bpd, agreed in October and effective from Nov. 1. That cut was part of the recent curbs.

"It has been decided that in the Algeria conference the level of implementation of the October decision to cut 1.5 million barrels per day will be examined, and on that basis a decision will be made accordingly," Khatibi said.

Any shortfall in implementing that cut would mean "a repeat cutback would have the same destiny", he said.

OPEC deferred a further output cut decision at a meeting in Cairo last month. OPEC delegates said Saudi Arabia and its Gulf allies demanded tighter adherence to existing curbs, with some fingering Iran. Tehran says it is sticking to its commitments. (Reuters)

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