Consumer nations on Sunday urged producers to keep oil prices stable or risk derailing a fragile global economic recovery, as top exporter Saudi Arabia forecast prices eventually moving toward $75 a barrel.
Group of Eight energy ministers were meeting in Rome against the backdrop of a price rally that has sent oil prices to a six-month high of more than $60 a barrel.
“If oil prices do spike up considerably, that would be a factor in delaying economic recovery,” U.S. Energy Secretary Steven Chu told a news conference.
Italian Energy Minister Claudio Scajola said: “A low oil price helps in times of economic crisis but discourages investment and does not guarantee a future of stability. It is necessary to have an equitable and not volatile price that can guarantee global economic growth and also the possibility of investment.”
Oil prices have almost doubled from last December’s low and risen well above the $50 level that Saudi Arabia has said it could live with to help nurse the world economy back to growth.
Algeria’s oil minister said an output cut was unlikely when OPEC meets in Vienna on Thursday. Saudi Arabia, the biggest and most influential player in the 12-member producer group, also said OPEC would “probably stay the course.”
Saudi Oil Minister Ali al-Naimi offered the prospect of prices and demand eventually rising but declined to speculate on when prices would hit the $75 level producers say is needed to encourage investment.
“Demand will pick up eventually when the economy recovers,” Naimi told reporters. “Eventually could be tomorrow or it could be 10 years from now, but eventually it’s going to happen, but when I don’t (know).”
Algeria’s Energy Minister Chakib Khelil predicted oil prices could touch $70 per barrel by end-2010 if the economy recovered, but warned recent price rises were being driven by speculation and a weak dollar rather than fundamentals.
Energy leaders at the summit agreed the financial crisis had dealt a sharp blow to investment in production for the long term. The International Energy Agency warned investment in oil and gas production would fall 21 percent in 2009.
Italian oil company Eni’s (ENI.MI) president, Roberto Poli, said the “magic range” for prices high enough to spur investment without hurting the economy was $60-$70 per barrel, while Edison (EDN.MI) CEO Umberto Quadrino put that at $60-$80 per barrel.
“The experience of the last price cycle demonstrated that to ensure steady economic growth, prices should not rise higher than $75 per barrel,” Poli said. “Oil price instability and unpredictability are the worst enemies of any well thought-out plan to build a different energy future.”
OPEC ministers are expected to make no change to oil supply at their Vienna meeting as higher prices ease their concerns about overflowing fuel inventories and the deepest fall in demand for years.
A senior Gulf source has said the group will stick to its current targets, but stress the need for full compliance.
But Iran’s OPEC governor said higher oil prices were lulling some OPEC members into a false sense of security. Venezuela said oil markets were over-supplied but it was too early to tell whether an output cut was needed.