OPEC Chief Calls IEA Oil Price Comments Contradictory
LONDON (Dow Jones Newswires), Mar. 6, 2009
OPEC Secretary General Abdalla Salem El-Badri Friday criticized the International Energy Agency for calling on the Organization of Petroleum Exporting Countries to pump enough oil to keep crude prices at today's low levels while urging increasingly cash-strained OPEC states to keep investment projects going.
"The IEA's comments are confusing and misleading. Whilst asking for prices to remain at $40 (a barrel), it also wants investments to be made that are not economically viable at these prices," El-Badri said in a statement.
El-Badri's rebuke of the Paris-based IEA, which monitors industry trends for big oil consuming nations like Japan and the U.S., followed comments Thursday from IEA head Nobuo Tanaka that today's oil prices of around $44 a barrel could, if sustained for many months, deliver a stimulus effect of $1 trillion to consumers.
Such comments have privately annoyed many OPEC producers that are now weathering intense financial strains as sharply lower oil revenues force budget and social spending cutbacks. Many OPEC producers would like to see oil prices around $75 a barrel.
El-Badri said the moderation in oil prices since last summer, when they peaked at $147 a barrel in the U.S., has softened the blow to consumers dealing with the worst economic environment in many decades.
But he reiterated, like the IEA continues to do, that the low price environment, if it persists, will hurt investment in new oil pumping capacity and could herald much higher prices down the road once economic recovery takes hold. Many analysts though believe economic recovery, once it does kick in, will be slow-moving and gradual in the short term.
"Oil prices need to be at levels to help sustain economic growth, by supporting longer-term energy industry investments across the board," El-Badri said, without naming a desired oil price.
About 35 oil drilling projects within OPEC states have been put on hold due to poor economics, though that number is far less than the number of projects postponed in non-OPEC states like the U.S. and Canada due to the rough financial environment.
OPEC will decide at its next scheduled meeting March 15 in Vienna whether to cut production even further.
El-Badri noted that the IEA, like every other energy industry body, has continually revised down its world oil demand forecast in past months. Many analysts currently expect global crude demand to fall by around 1% this year.
Copyright (c) 2009 Dow Jones & Company, Inc.
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