The market is well supplied. OPEC will not intervene because of speculators says El-Badri in an exclusive interview.
The oil price has reached its highest level of $99 in 27 months, but OPEC wants to remain firm.
Mr El-Badri, Brent has reached a 27-month high last week and is nearing the $100 mark. There are rumours that this level could hamper the economic upswing. Will OPEC take action now?
The average price for WTI last year was $79/b, while Brent stood at $77/b. It is only since the end of December 2010 that prices for Brent have reached $98/99/b. These prices are not fundamentally founded. There were a few technical problems, like the leak in an Alaskan oil pipeline. Speculators seized this opportunity and the price skyrocketed. We have to wait now. Prices have only been that high for the past 2/3 weeks.
Nevertheless, investment banks forecast that oil prices will rise again beyond the $100 mark this year. Is such a high oil price in OPEC’s interest?
We neither want the oil price to be too high nor too low. The oil price has to be high enough in order to enable investment, as the industry has to invest in order to find more oil for the market. On the other hand we do not want that global economic growth is stifled due to a high oil price. We have always reacted to higher demand, like in 2004 and 2005, when we produced more oil. But the market is currently well supplied. Stocks last for roughly 60 days, while the five-year average stands at 53 days.
Would it not be sign a of goodwill to raise production in order to counteract the high oil price?
The problem is that no one would buy the oil. I can assure you that if clients would approach our Member Countries and ask for oil they would get it. But we cannot increase production without having customers. We have to wait and we are watching the markets. OPEC will act in order to stabilize the market. But OPEC will not act because of speculators.
The next ordinary meeting of the OPEC is set for June. Is this not too far away when looking at the current development?
This is the next ordinary meeting. If market circumstances require an extraordinary meeting then we will meet.
The US bureau the CFTC has advanced the regulation of commodity futures trade markets. Does this regulation suffice?
It is the responsibility of governments to look for regulation. We are not specialists. All we are saying is that there should be guidelines as we do not want to have a situation again like in summer 2008 when the oil price reached a record high of $150/b. We do not want that hedgers and speculators split the market from the physical market. We do not ask for the complete dismantling of speculation, but there should be a way where everyone is satisfied.
How is the demand of oil developing? It rose dramatically last year, what are your expectations?
We expect a positive economic growth in 2011. It will not be as high as last year when the economy grew by 4.5%. For 2011 we are forecasting 3.9%, which is very good, so we expect a rise in the demand in oil. Our current estimates say that demand will increase by 1.2 mb/d. But these are estimates and one has to take into account the development of state deficits in Europe. It is obvious that almost all increases in oil consumption will be attributable to developing countries. In other words, the market is moving east. Oil consumption in Europe is declining.
In January, OPEC will meet with the International Energy Agency IEA and the International Energy Forum IEF in Saudi Arabia. What are the goals of this meeting?
Both OPEC, the IEA and the IEF have long-term forecasts up to 2030 as far as demand, reserves, prices and others are concerned and we agreed to compare these.
The interview was conducted by Eva Komarek
The oil price nears the $100 mark
The Brent price was nearing the $100 mark last week. This level was first reached in January 2008, and rose to a record high of almost $150/b due to speculation. The current optimizing on the financial market and the rise in entering risks by investors has again pushed the price for oil near this psychologically important mark. According to OPEC, this is mostly due to speculators and not to fundamentals, such as an increase in demand or lack of supply.
To the contrary, according to OPEC estimates, oil demand in 2011 will rise slower than last year. In the short-term, the leak in one of the most important US pipelines, the Alaska pipeline, has caused insecurity. However stocks are more than well supplied, which is why OPEC does not want to raise production quotas. Remains the question when OPEC will raise quotas. Saudi Arabia’s Oil Minister, Ali Al-Naimi, one of the most influential members of OPEC, has recently stated that he would prefer a price range of 70-80$/b.
OPEC Secretary General
On 1 January 2007, Abdalla El-Badri, born 1940 in Ghamminis, Libya, has assumed the position of OPEC Secretary General. He gained his first experience in the oil business with Esso Standard in the 60s. Later he became Energy Minister in his home country and in 2002 Vice Premier. In 1994 El-Badri also headed the OPEC Secretariat.
Source : www.opec.org