Rising oil prices do not threaten the global economic recovery and there is no need for an emergency OPEC meeting to consider increasing supply, Venezuela’s Energy Minister Rafael Ramirez said on Saturday.
Brent crude prices rallied last week to around US$98 a barrel while US oil futures were at about US$91, well above the US$70 to US$80 range that OPEC’s top exporter Saudi Arabia says is comfortable for both producers and consumers.
Venezuela often calls for higher prices to maximize its revenue from a sector that is the linchpin of an economy that has diversified little from reliance on oil in the last century and has been battling recession for the last two years.
“The price is approaching the fair value of US$100 per barrel,” Ramirez said, reiterating the stance of two other OPEC members, Libya and Ecuador, which say prices need to be higher to help producing nations maintain output.
Analysts are divided between those who see fundamental strength as the world economy recovers, driving up fuel consumption, and those who focus on differences between today’s relatively well-supplied market and that of 2008, when oil prices raced to an all-time high of nearly US$150 a barrel.
OPEC often says it will act to address any supply shortages, but not to tackle price rises that it says are caused by speculators. OPEC Secretary-General Abdullah al-Badri repeated that position on Saturday.
The group has held its supply target steady since a decision in December 2008 to implement a record cut in production levels of 4.2 million barrels per day (bpd) to bolster prices after the global financial crisis.
Ramirez said Venezuela, South America’s biggest crude producer, was not concerned by the current situation.
“We don’t think it [the price rise] impedes the recovery of the global economy,” he said. “Venezuela does not consider that an extraordinary or emergency OPEC meeting is necessary.”
Ramirez said the differential between Brent crude prices and US oil futures showed the need for a measurement based on a basket of currencies instead of just the US dollar.
“We have contracts that are linked to the Brent price. A currency basket for oil transactions is necessary for stability,” Ramirez said. “The spread shows the weakness of the dollar, which is a structural problem of the US economy.”
The spread between the two grades widened to as much as US$7.66 last week, the widest premium the London grade has held to the US’ West Texas Intermediate prices since February 2009.
Strength in price, trading volumes and the market structure of Brent crude has helped lure some big investment money that typically favored US oil futures — a trend that analysts say is likely to gather momentum.
Asked about US appeals that Venezuela stop doing business with Iran, Ramirez said no action would be taken as a result.
“We are sovereign,” the minister said. “They cannot dictate to us in this manner.”
Venezuelan President Hugo Chavez’s socialist government has actively sought to promote ties with fellow OPEC member Iran, with which it shares a distaste for US global power.
Venezuela had said it was sending 20,000bpd of gasoline to Iran, but that it had stopped in recent months because Tehran no longer needed the shipments.
Meanwhile, Iran’s oil minister said yesterday that US$100 for a barrel of crude was appropriate and there was no need to hold an emergency OPEC meeting to discuss the price.
“The price of US$100 for oil per barrel is real ... OPEC does not need to hold an emergency meeting over the price issue,” Massoud Mirkazemi told a news conference.
“None of the OPEC members find US$100 concerning,” Mirkazemi said, adding that some members of the producers’ group would still not see any need for an emergency meeting if the price rose to US$110 or US$120.
Iran holds the rotating OPEC presidency. The next scheduled OPEC meeting is on June 2.
“None of the members have asked for an emergency meeting and I think for a long time there would be no such request,” Mirkazemi said.
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