Cairo, Dec. 21 (Reuters): The world’s top oil exporter Saudi Arabia said on Saturday that the Organisation of the Petroleum Exporting Countries (Opec) would release more supply onto world markets if prices stayed above the cartel’s $ 22-28 a barrel target range until mid-January.
Saudi oil minister Ali al-Naimi said the 11-member group remained committed to a “fair price”, and would deploy an informal output mechanism to tame a price rally fuelled by an extended Venezuelan oil shutdown and fears of war in Iraq.
“We have said many times we are dedicated to preventing shortages, we are dedicated to stabilising the market, we are committed to a fair price,” Naimi told newspersons on the sidelines of an Arab oil minister meeting in Cairo. “We have a mechanism to trigger when it is necessary.”
Under an informal output mechanism, Opec aims to keep the price of its basket of crude in the $ 22 to $ 28 per barrel range by increasing supply if prices exceed the upper end of the range for 20 days. Opec’s basket stood at $ 29.56 per barrel on Thursday while New York crude futures settled on Friday at $ 30.30 a barrel, gaining 11 cents on the day.
“Should that price continue... in accordance with the price-band mechanism, it will be implemented, like what we have done in the past,” Naimi said. Qatar and Libya also backed an automatic Opec output increase if prices stay above $ 28 for 20 consecutive working days.
However, UAE petroleum and natural resources minister Obaid bin Saif al-Nasseri told newspersons that although the price-band mechanism had been triggered automatically once previously, it was too early to say whether that would happen again in this case.
“I think we would discuss it before we implement it,” he said.
Algerian oil minister Chakib Khelil also shed some doubt over the mechanism, saying that Opec would only release more oil if ministers detected a genuine requirement for extra supply, rather than a speculative price jump.
If the mechanism is triggered in mid-January, Opec would have to partially reverse a planned output cut, agreed only last week, of some 1.7 million barrels per day from January 1.
Opec’s mechanism calls for a minimum 500,000 barrel per day output hike, although ministers have in the past adjusted the volume according to market requirements. Opec agreed to rein in output on the assumption that Venezuelan supplies would resume imminently, but a strike in the world’s fifth largest exporter which has crippled oil operations has now entered its 20th day and shows no signs of breaking.
Arab ministers have gathered in the Egyptian capital for an annual meeting of the Organisation of the Arab Petroleum Exporting Countries (Oapec), which does not set output policy.
Opec last week set a new output target of 23 million barrels per day (BPD) for its 10 members with output restrictions. Sanctions-bound Iraq exports some 2 million BPD more under a United Nations oil-for-food deal.