LONDON: Oil’s sharp slide this week is welcome because high prices may hurt the world economy and in the longer term accelerate the use of alternative fuels, OPEC delegates said on Friday.
Oil fell below $109 a barrel on Friday, extending a record rout in the previous session, which wiped as much as 10 percent from the price, on concern about the strength of global economic recovery.
"The price had been going too high, to $120 a barrel, which is not good for consumers because it can affect the world economy," said an OPEC delegate, who declined to be identified by name. "A price in the range of $90 to $100 will be ideal."
Oil’s drop was prompted in part by the death of Al-Qaeda leader Osama bin Laden, the delegate said, rather than any fundamental change in supply and demand for oil. A second OPEC delegate made similar remarks.
"High prices will affect demand and encourage the trend towards renewables," the second delegate said. "The price is more affected by geopolitics. It was not fundamentals."
The two delegates were speaking for a country in the moderate Gulf core of the 12-member Organization of the Petroleum Exporting Countries and one of its four African members.
No-one at OPEC’s Vienna headquarters was available for any official comment on the oil market on Friday.
Political uncertainty
Despite the loss of Libyan supply and rising prices, OPEC has maintained there is no shortage of crude and no need for any increase in the group’s formal production target.
OPEC has not officially changed its oil output policy in more than two years. It meets on June 8 in Vienna and is likely to keep output policy unchanged, the first delegate said.
"I do not think we’re prepared to change the quota at the moment due to the geopolitical uncertainty. Libya’s production has dropped dramatically, but there has been a compensation by Saudi Arabia and other members."
Even so, other delegates to OPEC see the need for a clear signal in June that the group is prepared to take action to bring oil back below $100 a barrel.
Leading OPEC producer Saudi Arabia has become increasingly frustrated that, despite its unilateral effort to pump more, prices has stayed high. Riyadh insists it prefers a "fair price" of $75.
"I think OPEC may consider raising production as a psychological factor that would help prices come down," a delegate from one of OPEC’s Gulf countries said on Thursday.
