Kate Mackenzie Oil producers and consumers fret over future price spikes

Oil at $50 a barrel is okay for now, some Opec producers say, but producers and consumers that lower prices now could lead to a supply crunch.

Opec producers met with representatives of Asian consuming countries in Tokyo over the weekend for the 3rd Asian Ministerial Energy Roundtable Meeting.

Both Saudi Arabia and Qatar expressed acceptance of $50 oil – for now:

“I think this is very pragmatic, $40-$50 this is a pragmatic price for 2009,” said Qatari Oil Minister Abdullah al-Attiyah.

Saudi Oil Minister Ali al-Naimi said $50 oil was Riyadh’s “contribution to the world economy.”

Opec is so comfortable with this current price level that secretary-general Abdalla el-Badri said further production cuts are unlikely at Opec’s next meeting in May 28. He said another 700,000 barrels had to be taken out of production for Opec to meet 95 per cent of its most recent quota reduction target of 2.2m barrels.

But Mr el-Badri said he still wants to see oil prices ultimately at above $70 a barrel. And both Opec and the Energy Information Agency, the western oil consuming countries’ watchdog, warned of the consequences of lower oil prices creating under-investment in future oil production:

“I can’t rule out the possibility of an oil supply constraint in 2013 and 2014,” Nobuo Tanaka, Paris-based IEA’s executive director, said in an interview in Tokyo today. “Investments have dropped, and if this continues, an oil crunch would emerge.”

The attendees were also in agreement on curtailing speculation. A summary issued after the meeting by co-chairs Japan and Qatar said:

“Regarding transparency of commodity markets and supervision on over-the-counter markets, participants appreciated national authorities’ efforts and called for further harmonised actions such as introduction of position limits,” it said.

Opec and the EIA did not agree on everything, however. Mr el-Badri also criticised the EIA’s oil demand forecast for 2009, saying its figure of 83.4 million barrels was ‘exaggered’ while Opec’s own forecast of 84.18 mbd was “coherent”.

Related stories:

IEA sees oil supply crunch by 2013 on slow investment
Opec wants oil to reach $70 a barrel (AFP)
Gulf Opec okay for now with $50 oil, sees risks (Reuters)