Oil May Reach $ 96 a Barrel in 2006

Saudi Arabia’s oil minister said yesterday Opec would keep production steady when it meets next week, although he did not expect oil prices to fall soon due to issues beyond market fundamentals.

“There seems to be no reason to reduce, so Opec will continue the way it is right now,” Ali al-Naimi told reporters in New Delhi, where he is accompanying King Abdullah.

Asked about the possibility of raising output, he said: “There are no customers for additional oil.”

Naimi said the kingdom is still pumping 9.5mn bpd, as it did most of last year, although a Reuters survey estimated output at 9.4mn bpd in December.

He did not comment on an idea floated by Opec President Edmund Daukoru on Thursday for the group to agree on a future cut in production that would take effect closer to the second quarter, when demand reaches a seasonal low point.

“Of course I want (oil prices) to come down, but they are not going to come down because there are many issues besides demand and supply,” Naimi said. “There is no basis for the price to be where it is based on fundamentals.”

He did not say what the other factors were, but had said earlier this week that political tensions and refining capacity shortages were responsible for high prices.

Naimi did not say how far he wished to see prices fall, although some other members of the producers’ group have said they see prices stabilising in a $ 50-to-$ 60-a-barrel range.

Naimi later said the Organisation of the Petroleum Exporting Countries was not currently targetting any price range.

Growing geopolitical fears over supplies from Opec members Iran and Nigeria, plus uncertainty over Russia’s natural gas exports, have helped boost oil prices this month.

Oil has gained 9.5% in New York this year on concern that a dispute over Iran’s nuclear research programme may disrupt supplies from Opec’s No 2 producer. Rebel attacks on Nigerian oil installations cut supply from Africa’s biggest producer. The two countries account for 7.5% of global production.

“It’s not actual market fundamentals that are keeping oil prices high,” said Tetsu Emori, a strategist at Mitsui Bussan Futures Ltd in Tokyo who says oil may reach $ 96 a barrel this year.

Opec meets on January 31 in Vienna to discuss output policy, but most members – aside from Iran – have said the group should continue pumping near full-throttle due to high prices.

Gulf Times