Opec sees tough year ahead

Opec’s Secretary General said he was worried about the world economy, saying the rest of this year and first half of next year would be very difficult.

Abdullah Badri, speaking on Opec’s 50th anniversary, also said the oil market seemed to be accepting oil prices of $75 to $85 per barrel and said he expected prices to stay in that range for the rest of the year.

"The remainder of this year, the first half of next year will be difficult. We have to be very careful for any action taken by anybody," Badri told Reuters in an interview.

"It will be a very interesting, a testing period. Either we will leave recession behind or recession will come back."
"I think the world economy is in need of another stimulus package."

Oil prices have spent most of the last year between $70 and $80 per barrel and benchmark US crude oil futures were trading at around $77.90 by 1500 GMT today.

Badri’s comments suggest the Opec is unlikely to make any major formal changes to its output policy until the outlook becomes clearer. The group meets on 14 October.

"We are in a very critical period. We are walking a very thin line," Badri said of the economic outlook.

Opec has left its output ceiling unchanged for almost two years since announcing a record supply curb of 4.2 million barrels per day in December 2008 to combat lower demand and prices.

Members initially met most of the reduction, but since the middle of last year production has been rising as oil prices recovered.

In August, Opec met 53% of its pledged output cut.

Badri declined to comment on what Opec would decide when it meets in October.

Still, he praised Opec’s 2008 decision because it had allowed the group to be flexible in adjusting its supplies.

"That was the best decision ever taken by Opec. It gives a wide range of quantity and flexibility. You can move within this quantity. You just ask for more adherence," he said.

Oil prices were unlikely to rise because of high inventory levels and were likely to remain in their present range, Badri said.

"The fundamentals don’t support a higher price. We have very high stocks almost everywhere," he said.

"The market is accepting this $75 to $85," he said. "I think prices will stay in this range for the remainder of the year."

(Source: upstreamonline)


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