Opec pledges to push oil to above $50 a barre

The Times...

Opec members need an oil price above $50 a barrel to make exports worthwhile, the head of the cartel said today, adding that more production cuts were possible this year.

“We are not happy with $40 even $50 a barrel,” Abdalla Salem El-Badri, Opec Secretary-General, told a panel discussing energy security at the World Economic Forum in Davos.

Even $50 did not guarantee a “decent income for our countries”, he said, adding: “I hope that the price will pick up ... a $50 price will not permit us to invest."

Asked about further cuts by the cartel, he said: “If we still have some downward problems [on 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."

The price in New York of light sweet crude for March delivery fell today, trading at $40.93 a barrel, while Brent North Sea crude for March also fell to $44.65.

Since September, Opec has announced cuts of 4.2 million barrels per day (bpd), including 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 Mr Bardi said that all the oil would be taken off the market.

“For the information I am seeing at this time, it would be about 100 per cent,” he said of the cuts. “I think we will take out 4.2 million barrels per day."

Tony Hayward, the chief executive of BP, told the panel that Opec countries needed a price of about $60-$80 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.

Mr 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.