OPEC holds oil production targets, sees price of $70-$80 a barrel
Last week's $90 oil price was a blip that won't be sustained in the new year, the Organisation of Petroleum Exporting Countries indicated as it kept output targets unchanged.
Cold weather forecasts in America and Europe and speculation that the US may extend stimulus measures - weakening the dollar and boosting the appeal of commodities as an alternative investment - last week propelled oil prices to a two-year high.
The fragile global economy recovery and ample supplies will, however, prevent the price from rocketing, OPEC said in a statement on Saturday.
"Right now the market is very comfortable for consumers," Abdulla El-Badri, the OPEC Secretary-General, said at the group's meeting in Quito, Ecuador. OPEC has 6m to 7m barrels of spare capacity a day, Mr El-Badri said, and it won't act to raise production until those levels decline.
"The issue they looked at was whether $90 is a blip or a trend," said Bill Farren-Price, founder of consultant Petroleum Policy Intelligence, told Bloomberg. "They've taken the view that there are one-off factors such as the cold snap, a weak dollar, that won't be sustained in the new year."
The "increase in the annual average oil demand in 2011 is likely to be lower than in 2010," OPEC said. Lower demand will accompany "challenging risks to the fragile global economic recovery, including the adverse effect of possible currency conflicts and fears of a second banking crisis in Europe, all of which would negatively impact on oil demand."
Saudi Arabian Oil Minister Ali al-Naimi said that supply and demand are "in balance," and $70 to $80 is "a good price" for oil.
Global oil demand growth is forecast to slow to 1.6pc in 2011 from 2.8pc this year, according to the International Energy Agency.
OPEC has kept production limits at 24.845 million barrels a day since December 2008, when it announced the biggest reduction in output quotas ever as demand collapsed and prices plummeted at the onset of the global recession.
OPEC supplies about 40pc of the world's oil. The next scheduled meeting is in June at OPEC's Vienna headquarters.
"If they start producing significantly more, they implicitly or explicitly start sending a signal to the market that they want to dampen down prices," said Mike Wittner, head of oil market research at Societe Generale SA in New York.
"They seem to have enough oil, inventories are still high and crude stocks particularly in the US are still quite ample."
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