The $80 record high reached by crude oil prices is not sustainable because it is not supported by market fundamentals, the Organisation of the Petroleum Exporting Countries (Opec) said on Friday.
Abdalla el-Badri, Opec secretary-general, linked the price jump on Thursday to US refining bottlenecks, the hurricane season in the Gulf of Mexico and attacks against several natural gas pipelines in Mexico.
“We don’t think this is a permanent $80 a barrel. The fundamentals do not support the price at this time,” Mr El-Badri said. His comments are the first official response to the price surge after Opec agreed this week to increase its supply by 500,000 barrels a day.
Mr el-Badri also revealed that Angola, Opec’s newest member, would be given a production quota next January. He said the quota’s level would be agreed at Opec’s December meeting. Angola pumps about 1.6m b/d and any quota might jeopardise future investment in the country, analysts said.
Mr el-Badri’s remarks echoed those of delegates from Opec member states, expressing regret about the market’s reaction to the cartel’s production increase. “We are not happy,” said a delegate from a influential Opec member state.
The International Energy Agency, the industrialised countries’ energy watchdog, said that the production increase agreed by Opec was “small”, with one oil analyst describing it as “too little, too late”.
After breaching $80 on Thursday, US crude oil on Friday hit a new record of $80.36 before profit-taking dragged prices lower. Oil traders on Friday said that although fundamentals point to an over-valued crude oil market, speculators continue to pour more money and new increases were likely.
“Prices are high. We are not favour of high oil prices,” Mr el-Badri said. ”I don’t think it’s permanent,” he added.
Opec’s secretary general said the oil cartel, which produces about 40 per cent of the world’s crude oil, does not have a price target, rejecting suggestions from the IEA that the producers’ group is targeting $70 a barrel.
Opec dropped its last target, a price band between $22 and $28 a barrel, in 2005. Since then it has argued that it is the market and not the cartel that sets the oil price.
Mr el Badri’s insistence that Opec does not have a price target comes as the group faces potential US legislation against the cartel on grounds that it manipulates oil prices.
Some observers present in Vienna for this week’s Opec meeting said the ‘No Oil Producing and Exporting Cartels (Nopec) Act’, recently approved by the US House of Representatives but still far from being law, was in the cartel’s mind when it decided to increase its production and said it wanted to help the world’s economy.
