OPEC oil ministers signaled ahead of a meeting scheduled for yesterday that they saw no reason to change output targets given current global economic sluggishness, though they expect demand for crude will continue to grow.
“What’s missing right now is equilibrium in the price of oil,” Angolams Oil Minister Jose Maria Botelho de Vasconcelos said on Friday, after arriving in Quito. “I think US$90 dollars [a barrel] is a comfortable price.”
OPEC, which is responsible for 35 percent of global oil production, has not changed its output quotas since late 2008 and last month, Saudi Arabian Oil Minister Ali Naimi said oil between US$70 and US$90 per barrel was tolerable for consumers.
He echoed that sentiment upon arriving in Quito on Friday.
The 50-year-old cartel has had a good year, with prices hovering in the mid-US$80 range and profits up 32 percent over last year to US$750 billion, according to US Energy Department estimates.
Oil reached a two-year high of nearly US$91 on Tuesday — as traders gauged the dimensions of demand for next year and responded to a particularly harsh onset of winter in Europe.
The International Energy Agency (IEA) said on Friday that stronger-than-anticipated consumption next year in North America and emerging Asian economies led by China could compel OPEC to boost supply “if prices continue their relentless rise.”
Issuing its global oil demand forecast, the IEA said it anticipated a rise in demand next year to 88.8 million barrels a day, 260,000 daily barrels more than previously forecast.
The Paris-based agency nevertheless said it expected “quick agreement” from the OPEC ministers to maintain current output targets.
Analyst David Kirsch of PFC Energy in Washington agreed, citing current healthy inventories and continuing global economic uncertainty.
“If demand does turns out to be stronger than they’ve expected, there is still a safety cushion out there and they can come back later and increase production,” he said. “Or more likely, what happens is that individual members cheat.”
Oil supplies in major industrialized nations and China are currently well above normal, and while OPEC forecast a demand boost in North America and China in the monthly market report it published on Friday, it believes Western Europe’s festering debt crisis will dampen consumption there.
OPEC last changed output in late 2008 when it capped a record series of cuts to help boost prices that had plummeted with the global financial meltdown.
Some analysts believe conditions are now conspiring against much more upward pressure on prices as the effects wear off from the US Federal Reserve Bank’s -decision to issue and buy up US$2.3 trillion in US Treasury bonds. The post-meltdown move — essentially printing money — made US exports cheaper abroad and boosted the price of oil. It also encouraged the Chinese to buy and store more oil.
Many analysts believe US$100 a barrel oil is inevitable next year though it could well take months.