Malaysian state energy firm Petronas said yesterday that the crude oil market’s current fundamentals call for lower oil prices.
“Given the current state of market fundamentals and cost environment, I believe prices should remain within the range of US$75 to US$80 a barrel,” Shamsul Azhar Abbas, the oil company’s chief executive officer, said at an industry gathering.
Oil was down in Asian trade yesterday ahead of a key OPEC meeting this week in Vienna.
New York’s main contract, light sweet crude for July delivery, dipped US$0.14 to US$100.08 a barrel, while Brent North Sea crude for July delivery lost US$0.41 to US$115.43 in the afternoon.
Referring to the current high oil prices, Shamsul asked: “How have we reached these price levels, this early in the economic cycle, given the absence of any real evidence of shortages in the physical market?”
The 12-nation OPEC will meet tomorrow in the Austrian capital amid growing fears that high crude prices could further dent faltering world economic growth and energy demand.
The International Energy Agency has already called on OPEC to increase output and prevent another damaging spike in prices, with seasonal demand set to strengthen in the coming months as the northern hemisphere enters summer.
The oil cartel, which pumps 40 percent of the world’s crude, has left its production target at 24.84 million barrels per day since early 2009.
Gulf Arab OPEC members led by Saudi Arabia will push for an increase in supplies at a meeting of the oil cartel this week in an effort to support flagging world economic growth by bringing crude prices back below US$100 a barrel.
Data indicating that economic recovery may be stalling in the West is worrying OPEC’s core Gulf members Saudi Arabia, Kuwait and the United Arab Emirates.
Saudi and its fellow Gulf producers will argue that oil prices are undermining the economic growth that fuels demand for OPEC crude and that more supply is needed to balance demand in the second half of the year.
However, Riyadh and its fellow Gulf Arab nations might face opposition from OPEC’s leading price hawks, Iran and Venezuela, who argue that high prices are justified and that, in any case, OPEC is powerless to prevent speculators from controlling price direction.
Turning to oil demand in Asia, Shamsul predicted that this fast-growing region would have consumed more than 250 billion barrels of oil between now and 2030 — more than six times its current proved reserves of about 40 billion barrels.
Warning that oil production in the region was expected “to peak and subsequently decline,” within the next 20 years, he said Asian producers should prolong oil field life and step up the hunt for oil to satisfy strong demand.
Shamsul said geology-based assessments have indicated that -undiscovered oil in Asia was about 50 billion barrels — equivalent to one-and-half times the combined proved reserves of Indonesia, Vietnam and Malaysia.
“Our challenge is thus to make them commercially attractive [for exploration],” he said.
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