CAIRO (AFX-ASIA) – OPEC will activate a mechanism to keep oil prices within the cartel’s US$22-28 a barrel target band if prices continue to stay higher on world markets, Saudi Oil Minister Ali al-Nuaimi said.
“We are committed to a fair price,” the minister told journalists on the sidelines of an Arab oil ministers’ meeting here.
“We have a mechanism to be triggered when it is necessary. It is not yet in place. And should the price continue (to stay above US$28), the price band mechanism will be implemented like we have done in the past,” he said.
OPEC agreed to a price band mechanism in March 2000 under which the cartel would raise output by 500,000 barrels per day if prices remain above the range of US$22-28 for more than 20 consecutive trading days.
By the same token, OPEC would cut output by the same quantity if prices fell below US$22 for 10 consecutive days.
Qatari Oil Minister Abdullah bin Hamad al-Attiyah said the 11-member cartel would review a new 23 million barrels per day production ceiling it set for its members earlier this month if there were a war in Iraq or a shortage.
“In case of war or in case of any shortage, OPEC will have to take another decision,” he said ahead of the opening of Saturday’s meeting of the Organization of Arab Petroleum Exporting Countries (OAPEC).
Like other Arab oil ministers, Attiyah said that OPEC would seek to make up the difference if the situation in either Iraq or Venezuela led to a production shortfall.
But he added that so far the 24-day-old strike in Venezuela which has largely paralysed its oil industry did not appear to have created a supply shortage.
Both Iraq and Venezuela are members of OPEC, though Iraq’s exports are limited by an oil-for-food deal with the United Nations aimed at easing the effect of UN sanctions imposed after Baghdad’s 1990 invasion of Kuwait.
Venezuelan government opponents have said they will continue their strike in defiance of a Supreme Court order to reopen the oil industry.
Algerian Energy Minister Chakib Khelil for his part assured that “OPEC is ready to make up for any shortages,” but added that prices were currently high because of the “political situation” and not because of “a shortage.”
Asked about a possible output increase if a war over Iraq produces shortages, he replied: “We could increase production if there is an imbalance on the market, but not for political reasons. If war is unleashed and there is (still) an equilibrium between supply and demand, why increase production?”
OAPEC, head-quartered in Kuwait, comprises 10 Arab oil producers — Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria and the United Arab Emirates. Only Bahrain, Egypt and Syria are not also members of OPEC.