Oil price decline severe due to ‘tremendous surplus’: OPEC chief

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Photo - James Davies

Iraqi Oil Minister Abdul Kareem al-Luaibi said the latest decline in crude price has been severe despite “tremendous” surplus in the market.

“It is very clear that there are tremendous surplus quantities that led to this severe decline in the prices,” al- Luaibi said Monday in Vienna, where he is attending the meeting of the Organisation of Petroleum Exporting Countries (OPEC).

“This would not serve anyone.”

The OPEC chief told a news conference that oil prices at $100 to $120 are “a reasonable and acceptable price index.”

Brent crude oil futures traded around $99 on Monday in London.

OPEC ministers gathered in Vienna to review the cartel’s output target of 30 million barrels a day. According to the International Energy Agency’s most-recent monthly oil-market report released on 11 May, members are exceeding output by about 1.9 million barrels, led by Saudi Arabia which supplies about 40% of global crude.

Al-Luaibi, OPEC’s Iraqi chief, said no discussions on individual quotas for member nations will take place during this week and it will be “many years” before the cartel talks about a specific allocation for Iraq’s own production level.

Oil prices recently plummeted over worsening Europe’s sovereign debt situation, soaring US unemployment and receding fears of a conflict over Iran’s nuclear programme. Brent for July settlement has dropped 17% since the beginning of May on the London-based ICE Futures Europe exchange. The July contract fell 72 cents at $98.75 a barrel on Monday.

Iraq expects to receive final development plans from international oil companies detailing plateau production rates “in a few months” as the country reviews its long-term output target, the Iraqi oil minister said.

Iran oil replacement denied

OPEC’s Iraqi president Abdul Karim al-Luaibi denied Baghdad was overproducing to make up for Iranian production being lost to Western sanctions.

“Those who say that Iraq has compensated for Iranian oil production are mistaken,” the Iraqi oil minister said. “We have no big increase in production to compensate for Iran.”

When asked what oil price Iraq would like to see, he said: “I have said previously, that most economic analysts believe that prices between $100 and $120 are reasonable and acceptable prices that serve the global economic engine.”

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