The price of oil today is roughly half of what Opec wants it to be and the cartel is prepared to make further cuts in production, according to its secretary-general. Abdalla El-Badri told the Financial Times that if oil prices did not rise from current levels before Opec’s March 15 meeting, the cartel would “not hesitate to take further action” by cutting production among member states. Any such move would add to the cumulative cuts of 4.2m barrels per day that Opec has instituted in two rounds since September. Mr El-Badri and Mohamed al Hamli, minister of energy for the UAE, said in speeches to an energy conference in London on Monday that a “reasonable” oil price was between $60 and $80 per barrel. “We must recognise that if the price environment does not change now, we will face much worse problems in the future,” Mr El-Badri said, sharpening warnings he has made over the past month.

The comments led to a slight rise in oil prices on Monday, with US crude for March delivery trading at about $40 per barrel and Brent crude climbing to almost $47.

With oil prices at today’s “extremely low levels”, he warned, companies would find no incentive to explore for and develop new fields, thereby laying the seeds of a supply crunch when the world economy recovered.

Oil prices had already fallen so close to production costs, he added, that 35 of 150 upstream oil projects under development had been postponed, with more expected to follow.

One energy executive doubted whether Opec – which accounts for about 40 per cent of the world’s oil production – could unilaterally push prices to the $60-$80 band this year. The effect of recent cuts were hard to measure so far, he said, adding that the pace of economic deterioration among member states was occurring so fast that concerted action was more difficult than ever.

But 80 per cent of Opec’s 4.2m b/d reduction had already been achieved, Mr El-Badri said. At next month’s meeting in Vienna, the cartel would determine whether member countries had achieved the remaining 20 per cent of targeted cuts.

Last year’s oil-price climb above $140 per barrel had much less to do with physical demand than futures speculation, Mr El-Badri said, as he called on governments to tighten regulation of oil futures markets.

Related posts...

• June 22, 2010 -- UK Business Energy Prices: (3)
  A new survey carried out by the Economist Intelligence Unit has revealed that over 80% of British firms expect energy and fuel prices to rise sharply and almost 50% have great concern that the UK coul...
• February 21, 2010 -- Identifying a Half Hour Meter: (0)
  How to find out if you have a half hourly meter – So how do you know if you have a half hour meter?  It’s actually quite straight forward, and all you will need to find this out is a recent copy o...
• February 10, 2010 -- UK Business Gas Prices: (0)
  Business Gas Prices can be difficult to understand, as there are many different types of pricing structures available.  You could simply ring around and obtain gas prices direct from suppliers, but it...
• February 7, 2010 -- Oil Prices Back To $70 Range: (0)
  Oil prices plunged in a busy trading session on Friday, triggering big losses across the commodities markets, as investors went back to buying into the US dollar.  Crude oil prices did have a partial ...
• February 5, 2010 -- CRC Business Lights: (1)
  The era of the 'on-all-night' illuminated high street could end, the Environment Agency is predicting. The agency says new rules will force businesses to switch off lights and displays at night to mee...
• February 3, 2010 -- Bglobal Smart Meter Deal: (3)
  Bglobal Plc said it has signed a new agreement to supply and install smart meters for British Gas Business during 2010. The contract value is anticipated at more than £12 million. In addition, the com...

RSS feed for comments on this post. TrackBack URI

Name (required)

Mail (will not be published) (required)

Website

CAPTCHA Code *