OPEC members need an oil price above 50 dollars a barrel to make exports worthwhile, the head of the cartel said Thursday, adding that more production cuts were possible later this year.
“We are not happy with 40 even 50 dollars a barrel,” OPEC Secretary General Abdalla Salem El-Badri told a panel discussing energy security at the World Economic Forum in Davos.
Even 50 dollars did not guarantee a “decent income for our countries,” he said, adding: “I hope that the price will pick up… a 50-dollar price will not permit us to invest.”
Asked about further cuts by the cartel, he said: “If we still have some downward problems (of prices), OPEC will not hesitate to take some quantity out of the market.
“We cannot tell at this time before our next meeting on March 15.”
New York’s main futures contract, light sweet crude for March delivery, traded at 41.63 dollars a barrel on Thursday, while Brent North Sea crude for March fell 68 cents to 44.22 dollars.
Since September, OPEC has announced cuts of 4.2 million barrels per day (bpd) with a reduction of 2.2 million bpd on December 17 in Algeria.
There had been doubts about the discipline of OPEC members and their willingness to reduce output by the agreed amount, but Bardi said all of the oil would be taken off the market.
“For the information I am seeing at this time, it would be about 100 percent,” he said of the cuts. “I think we will take out 4.2 million barrels per day.”
Tony Hayward, the chief executive of British oil group BP, told the panel that OPEC countries needed a price of about 60-80 dollars per barrel to balance their budgets and invest in social programmes.
“A price somewhere between 60-80 would be appropriate,” he said.
He also explained that a high price was needed to encourage investment in new oil fields that will be required to meet future demand, particularly from energy-hungry India and China.
Badri concurred, saying that the lessons from past oil price crashes had to be learned.
“We… don’t want what happened in the 1980s where we did not invest and laid off very qualified people and when the demand picked up we were paying the price of shortages” of materials and people, he said.
“If we don’t invest now we will have the problem” of a supply crunch in the future when demand picks up, he said.
(AFP & Zawya)