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OPEC considers $80 as new oil price

By on June 6, 2015

Nearly a year after oil markets entered a deep downward spiral, unmoored from the $100-a-barrel mark that had anchored them for years, some Organisation of Petroleum Exporting Countries members are publicly talking for the first time about a new “fair” price for their crude.

Oil ministers from Iraq, Venezuela and Angola said in Vienna that a price of $75 or $80 a barrel – barely $10 above the going rate – could be just fine.

Iraq’s Adel Abdel Mahdi said it would be “equitable”.

Privately, one Gulf OPEC delegate was quoted as saying that crude might be trading around the $80 level next year, once markets rebalanced.

It remains to be seen whether this new range becomes a common refrain for the group, which has effectively given up efforts to maintain prices in order to defend its share of the world market.

Importantly, Saudi Arabia – which for years had pointed to $100 a barrel as a “fair price for producers and consumers” – has given no indication that it subscribes to this view.

Yet simply by uttering the numbers, OPEC ministers are helping to quench a craving among traders, investors and energy executives for clarity on medium-term oil prices, an indication as to when months of uncertainty and volatility may end.

To be sure, there is no indication that the OPEC as a whole feels any urgency to push prices back up into the $70s – in fact quite the opposite. The group is expected on Friday (today) to agree to maintain its current production for months to come.

 

[Punch]