Saudis imply OPEC will hold production steady

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His Iraqi counterpart, Hussain Al-Shahristani, described the market as “well-supplied, if not oversupplied.” Asked what he thought was a reasonable price for OPEC oil, he replied: “Where we are now.”

Iraq is the only OPEC member not under production quotas because of the conflict there.

Al-Shahristani said Iraq was producing 2.5 million barrels a day as of early this month, with violence down, adding he expected that to rise to 2.7 million barrels of crude a day by the end of September.

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Asked whether present prices reflected market fundamentals, Khelil told reporters: “Right now, fundamental prices would probably be in the range between $90 and $100, suggesting prices could go even lower before they aroused concern.

In separate comments, he said a large-scale move out of the oil market by speculators “has helped drive prices down” but warned their return could again roil prices and set off an unwarranted upward spiral.

“There is too much at stake across the world for such high levels of volatility to be allowed to continue in this chaotic, damaging manner,” he said.

He attributed the steep price decline of past weeks to the “recent strengthening of the dollar, the easing of geopolitical tension and the sharpened expectations of a global economic slowdown.

Still, prices remain 14 percent higher this year than in 2007, and a barrel of benchmark crude still fetches four times what it did five years ago.

While high prices drive down demand, $100 per barrel for some OPEC members is a psychologically important benchmark. Venezuela warned ahead of the meeting that slippage much below that mark should trigger production cutbacks, although the Saudis have suggested they could live with prices between $80 and $90.

Such diverging opinions could set the stage for a struggle in December, when OPEC is scheduled to meet again — or even prompt emergency consultations before that.

“If winter demand doesn’t come around, the OPEC might have to cut production below its set target,” said Ehsan ul-Haq, head of research at JBC Energy in Vienna, Austria.

He mentioned a further downturn in the U.S. economy and the possibility of a mild winter as possibly depressing the world’s appetite for crude by year’s end.

With most of the oil ministers observing the Islamic month of Ramadan, the meeting on output levels was set for late in the evening.

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