London – World oil prices rallied on Wednesday, while Opec secretary general Abdullah El-Badri insisted that recent sharp falls for crude futures were not justified in terms of demand and supply.
Addressing the Oil & Money Conference – a key annual event in the energy sector calendar – El-Badri said that rising supplies did not justify the extent to which prices have dropped in recent months.
Prices rose solidly on Wednesday before the outcome of the US Federal Reserve’s latest monetary policy meeting and a weekly report on US energy inventory levels.
In afternoon London trading, Brent North Sea crude for delivery in December rallied $1.38 to stand at $87.41 a barrel.
US benchmark West Texas Intermediate for December jumped $1.11 to stand at $82.53 a barrel compared with Tuesday’s closing value.
“We don’t see that much of a change in the fundamentals,” El-Badri said on Wednesday.
“Demand is still growing, supply is also growing. The magnitude of the increase in the supply does not really reflect this 25% change in the market.”
Crude futures have slumped by about one quarter in value since the middle of June, blamed largely on a supply glut, particularly in the United States. Demand is meanwhile downbeat in Europe against a backdrop of weak growth in the eurozone.
While lower oil prices reduce revenues for producers, including the dozen member countries that make up the Organization of Petroleum Exporting Countries, the cheaper costs benefit consumers and industries which use oil and gas products.
Opec will decide on whether to alter its output levels at a meeting in Vienna on November 27.
El-Badri acknowledged that higher prices would be welcomed by both producers and consumers, adding however that Opec did not have a specific price target.
“At $95 to $100 to $105 a barrel everybody is happy, the producers can make money, they can invest, consumers can survive, they can manage. But I must insist that this is not Opec target,” he said of the organisation that pumps out about one third of the world’s oil.
Speaking also at the conference, the chief executive of British energy giant BP welcomed current oil price levels.
“We have been making our investment decisions on a $80 price so I feel comfortable with the investment decisions we’ve made,” said Bob Dudley.
“We could see the price come down for a certain period of time. I don’t think that’s all bad for the world by the way. A lower oil price will benefit some of the economies which actually create the engine of growth. (…) I can see the good and bad sides of it,” he added.
On Tuesday, BP reported that group net profit fell 63%to $1.29bn in the three months to the end of September, in a context of weak oil prices and the fall of the ruble.
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