Crude oil demand will gain this year and prices may rise to more than $85 a barrel as markets shrug off concern a debt crisis in Greece may spread to other European nations and slow growth, OPEC ministers said.
“By bailing out Greece, its bailing out the future of Europe,” Algeria’s oil minister Chakib Khelil said today at a conference in Doha, Qatar. “Prices should go back to $80 to $85 a barrel.” Libya’s National Oil Corp. Chairman Shokri Ghanem said “prices could reach $85, $87, even higher” after the European Union rescue package.
Oil rose for the first time in a week today after EU governments and the International Monetary Fund agreed to an emergency lending mechanism of about 720 billion euros ($928 billion). Crude for June delivery rose as much as 4.5 percent to $78.51 a barrel on the New York Mercantile Exchange and traded at $76.17 at 13:10 p.m. in New York.
While the Greek debt crisis may have a “psychological” impact on crude markets, it will have no impact on fundamentals as supplies remain sufficient, Qatar’s Oil Minister Abdullah al- Attiyah said in Doha.
Members of the Organization of Petroleum Exporting Countries should abide by oil-production levels approved in 2008 even as demand increases, Abdalla Salem El-Badri, the group’s secretary general, said yesterday. The ministers spoke at a meeting of the Organization of Arab Petroleum Exporting Countries, which includes seven of OPEC’s 12 members and ends May 12.
Very Good Demand
“Oil demand is very good, it is going to increase this year,” Saudi Arabia’s Ali al-Naimi said to Bloomberg in Doha yesterday. Use of crude will rise in China, India and the Middle East, as those countries “are not affected by what’s happening in Greece,” Algeria’s Khelil said in an interview yesterday.
Ministers from Arab oil-producing nations gathering in Doha showed no signs of wanting to raise or lower OPEC’s existing production targets even as oil prices declined 13 percent last week, the biggest drop since December 2008. Crude slumped, reaching a 12-week low on May 7, as U.S. gasoline inventories exceed seasonal norms and Europe struggled with the Greek debt crisis that may slow economic recovery and demand for fuel.
Before today oil had retreated from its 18-month high of $87.15 reached May 3. Crude futures dropped to $74.51 on May 7, the weakest intra-day price since Feb. 16. The fluctuations have sent volatility to its highest in almost two months.
Al-Naimi, minister of the world’s largest crude oil exporter, brushed off the possibility of the Greek crisis spreading, saying “we shouldn’t be concerned about these little things.” The minister said on March 30 that he “hopes” prices will stay at $70 to $80 a barrel.
State-owned Saudi Arabian Oil Co. will supply full volumes of crude oil to Asia for loading in June. This will be the seventh consecutive month the company will provide 100 percent of cargoes, according a survey of Asian refinery officials.
OPEC agreed in March to uphold output quotas for a fifth time. The group slashed production quotas at a meeting in December 2008, after energy demand fell during the worst recession since World War II. Crude oil prices slumped from a record $147 a barrel in July that year to $32 in December. Members are currently exceeding those allocations by about 2 million barrels a day.
“We just have to abide by that decision,” OPEC’s El-Badri said, putting members’ compliance to the quota at 51 percent. The oil market has excess production capacity of six million barrels a day, Algeria’s Khelil said today.
Crude oil inventories in the U.S. gained 9.6 percent over the past three months to 360.6 million barrels, the highest since June 2009, according to government data.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC’s next meeting is on Oct. 14.