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The Organization of Petroleum Exporting Countries (OPEC) would intervene if oil prices were to reach $100 a barrel, according to the group's president and Kuwait's oil minister.
Analysts have been speculating about whether or not oil prices would again breach $100 a barrel. The price of light, sweet crude for December delivery rose 76 cents, or 0.97% yesterday (Tuesday) to settle at $79.44 a barrel on the New York Mercantile Exchange (NYMEX). Prices have surged about 140% from their February lows, soaring as high as $82 a barrel last week.
While the global economy has shown signs of recovery, the recent price surge has not been the result of fundamentals. Data due after the close and on Wednesday is expected to show a build of 900,000 barrels in U.S. commercial crude stocks for the week ended Oct. 23, according to analysts polled by Platts. Oil stocks in developed countries are enough to meet demand for 61 days, a level well above their five-year average.
"There is more than adequate supply, more than adequate inventory and less than adequate demand to propel prices to this level," Edward Morse, head of research at New York-based brokerage firm Louis Capital Markets, told The Washington Post.
Still, OPEC President Jose Botelho de Vasconcelos, who is also Angola's oil minister, said Sunday that his organization would consider boosting production to preserve the global recovery if prices continue their march to $100 a barrel. While de Vasconcelos said such an increase would come at the group's Dec. 22 meeting, other members have said a special summit might be called in such a situation.
If prices broke $100 a barrel then "we would hold a special session and we'd decide," said Kuwaiti oil minister Sheikh Ahmad al-Abdullah al-Sabah.
Of course, not every OPEC member supports a production increase. With 61 days of oil in reserve, inventories are substantially above the 55-day level OPEC would like to reach before increasing supply.
"Under current conditions requesting OPEC to increase its crude output in order to decrease the oil price would be improper," Iran's OPEC governor, Mohammad Ali Khatibi, told the Islamic Republic News Agency (IRNA).
Iran, along with Venezuela have traditionally argued on behalf of higher prices, but in this case many analysts believe Khatibi has a point: Oil supply isn't the problem.
"It is still sentiment, not fundamentals, that is driving oil prices and therefore a downward correction back towards $70 per barrel would appear to be on the table," JBC Energy GmbH wrote to clients in a note Monday. "Once again it appears that investors are flooding money into oil markets to try and make a quick buck, despite many having had their fingers burnt last year when oil prices fell from their high of $147 to below $34 per barrel."
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