Badri: OPEC made 2 million bpd plea to delegates

Badri blames speculation, says IEA "should really be quiet".

Badri claims OPEC spare capacity stands at "4.5 million bpd or more," leaving plenty for any emergencies. GETTY IMAGES
Badri claims OPEC spare capacity stands at "4.5 million bpd or more," leaving plenty for any emergencies. GETTY IMAGES

Oil prices will rise and could harm the world's economic recovery if an expected supply shortage materializes later this year, OPEC Secretary General Abdullah al-Badri said on Tuesday, according to Reuters.

Consumer countries urged the Organization of the Petroleum Exporting Countries (OPEC) to pump more to replace supplies shut down in Libya and to prevent fuel inflation hurting economic growth.

Last week's OPEC talks collapsed without a deal, although Badri said the OPEC secretariat had presented all the evidence for a production rise to delegates.

Its 33 economists pointed to the need for 2 million barrels per day (bpd) more oil in the third quarter and 1.5 million bpd in the last three months of the year.

"This shortage of 2 million barrels, if it materializes, in the third quarter and the fourth quarter, then the price will go up for sure," Badri told the Reuters Global Energy and Climate Summit.

While he agreed with the need for more oil, Badri took exception to insistent lobbying from the International Energy Agency (IEA), which represents 28 industrialized countries and has long engaged in cooperation talks with OPEC.

"We never interfere in the IEA and really we don't want them to interfere in our business. They should do it in a professional manner. We should not talk to each other through the media," he said. "As long as they are talking to me, they don't have to go to the public. They should really be quiet".

With or without an OPEC deal, leading exporter Saudi Arabia's Oil Minister Ali al-Naimi said the kingdom would pump as much oil as the market needed, and is reported already be increasing supply.

Badri said spare capacity was still "4.5 million bpd or more," leaving plenty for any emergencies. He did not foresee a repeat of the 2008 record bull run, when U.S. crude hit a record high just above $147 a barrel.

"I don't think we will see $147. I think now we have spare capacity. I think if consumers will go to member countries and ask for more oil, I'm sure they will sell it to them," he said.

Badri would not be drawn on a price range OPEC considered appropriate, but said its aim was for moderate prices.

"We don't want to see a very high price. We don't want to see a very low price. We would like to see a moderate price," he said. "We think high prices will affect world growth."

Badri said OPEC would carry out its mandate of moderating prices and that its next scheduled meeting in December would reach agreement.

"I think the ministers will go back and discuss the outcome of the meeting and they will explain to their governments what happened," Badri said. "I am sure they will educate themselves more and come up with a decision that will be approved by all the member countries."

The OPEC official said the December meeting would have to tackle the realignment output targets among the 11 members subject to them, a task made harder while Libyan output is shut down.

Badri did not anticipate OPEC would call an emergency meeting before December, saying that would be up to the president and the members. "When we meet in December, our numbers will be proved valid or the price will come down. I don't know," Badri said.

OPEC last changed its official output limit in December 2008, setting a target for 11 members except Iraq to produce no more than 24.84 million bpd. With actual production of the 11 about 1.4 million bpd higher than that, Badri said OPEC had effectively ditched its old targets.

"This target is really not valid any more due to the current production," he said.

Whatever the case, he hoped there would be no more outside pressure from bodies such as the IEA, which issued a veiled threat to OPEC before last week's meeting.

It had said it would use all the tools at its disposal, which include the use of oil held in emergency reserves, unless OPEC increased supply to calm the oil market. "Strategic reserves should be kept for their purpose and not used as a weapon against OPEC," Badri said.

Aside from supply and demand, Badri cited speculation as a huge factor in the oil market and said neither the two world benchmarks Brent and U.S. crude reflected market realities.

Brent's premium to U.S. crude, also known as West Texas Intermediate (WTI), was trading close to a record of well above $22 a barrel on Tuesday.

"I don't feel comfortable. I don't think they represent the market, WTI or Brent," said Badri, who saw a need for a third benchmark, but said he could not say what it should be.


Most Popular

Digital Edition

Oil & Gas Middle East - September 2020

Subscribe Now