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Saudi: Global economy ready for $75-$80 oil

(Agencies)
Updated: 2009-05-27 17:10

VIENNA -- The global economy has strengthened enough to cope with oil at $75-$80 a barrel and that level will be hit soon as fuel demand picks up, Saudi Oil Minister Ali al-Naimi said on Wednesday.

In this Friday, May 1, 2009 photo, an operator walks by the main oil line on offshore oil drilling platform 'Gail' operated by Venoco, Inc. off the coast of California near Santa Barbara, California. [Agencies]

Oil has already climbed from a low of $32.40 last December to six-month highs well above $60 a barrel this week.

"The price rise is a function of optimism better things are coming in the future," Naimi told reporters in Vienna.

"We see offshoots of recovery," he added. "There are a lot of positives in what I say because I am seeing a recovery."

Naimi was speaking to reporters ahead of Thursday's meeting of the Organization of the Petroleum Exporting Countries, which he said did not need to change the group's output policy.

He also said calling another extraordinary meeting before the group's next regular meeting in September would "make no sense".

Moving Target

US crude futures, the international benchmark, are above the $50 a barrel a level OPEC had said it was willing to live with while the global economy recovered from deep recession, but still below the $75-$80 Saudi Arabia and other producers have said was needed to drive investment in new energy supplies.

As a stronger economy boosts energy demand, Naimi said oil inventories would shrink, with the increase in consumption driven by emerging economies.

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"Demand is picking up, especially in Asia," he told reporters.

He saw increased fuel use in Latin America and the Middle East, but an only limited upturn in consumption in the world's leading energy consumer the United States.

Oil inventories have reached the equivalent of around 62 days of forward cover, but Naimi saw them shrinking to 52-to-54 days, a level OPEC considers comfortable.

"Demand is picking up. It will bring down the days of forward cover and we will be happy thereafter," he said.

Before last December's crash, oil prices had risen to a record of nearly $150 a barrel last July.

Producers, concerned about destruction of demand, as well as consumers said that level was too high.

Naimi has warned under-investment in bringing new energy supplies onstream could drive prices sharply higher once again and said the challenge would be to keep prices at a fair level for all.

"That is the biggest challenge," he said when asked how to contain any price rise.

"It's very difficult. There are too many players in the market. It's impossible with so many players."