Algeria worried Opec compliance slipping
Rome, May 25, 2009
Algeria's oil minister said Opec was unlikely to cut output at its meeting next week amid a weak global economy, warning compliance with previous supply cuts had slipped in April and needed to be tightened first.
'Cutting will give a wrong signal for the recovery of the economy. Most people are waiting for us to help the world economy,' said Chakib Khelil on the sidelines of the Group of Eight energy summit in Rome.
'I don't think anybody will go for cutting, especially when you have lower discipline than what we have had in the past.'
He added that compliance with previous supply curbs in April had 'relaxed' and stood at less than 80 per cent now, which would be 'a big discussion' when Opec meets on May 28 in Vienna.
Khelil said he was worried about high inventories, which he predicted would begin falling as early as the summer driving season.
'Inventories should start coming down as soon as the summer. We should have an equilibrium between supply and demand by early next year,' he said, adding that Opec might need to increase supply by then.
He also forecast oil prices rising to $70 per barrel by the end of 2010 if the global economy improves.
'You see them (prices) going to $60-$65 by the end of the year and beyond that depending on the economy. If the economy improves in the US and (is) followed by European recovery, we could see by (the) end of 2010, $70,' he said.
Oil rallied to a six-month high above $60 a barrel last week, almost double December's low and well above the $50 level that top oil exporter Saudi Arabia and its neighbours have said they could live with to help nurse the global economy back to growth.
He said the recent rise in prices was not tied to fundamentals, but was driven mainly by speculators and a weak dollar as well as by expectations of improving demand.
'The prices of $60-$62 don't reflect the situation you have today. You have stocks at 62 days while the average is 52 days,' he said. 'How can you have $62 when you have such huge stocks?'
But Khelil warned of a fragile economy, adding that a rise in oil prices should not be taken for granted.
'The improvement in the economy is flimsy, fragile. It's not something that you can count on. It could revert and it could take us by surprise,' he said. – Reuters