Saudi Arabia wants oil price at $75 a barrel

Saudi Arabia said Saturday that it hoped to raise oil prices to $75 a barrel, but indicated that no measures would probably be taken until an OPEC meeting next month in Algeria.

Saudi Oil Minister Ali Naimi said that OPEC will "do what needs to be done" to shore up falling oil prices when the cartel meets next month in Algeria, even as his king told a Kuwaiti newspaper that $75 a barrel was a fair price for oil

Naimi did not entirely rule out the chance that the Organization of Petroleum Exporting Countries would slash output at the hastily convened meeting Saturday, but he did say the bloc needed to wait until the meeting in Oran, Algeria on Dec. 17 to assess the impact of two previous rounds of cuts.

His comments came after Saudi King Abdullah told the Kuwaiti daily Al-Seyassah that oil should be priced at $75 a barrel, far above its current rate.

"We believe the fair price for oil is $75 a barrel," he said, without elaborating on how this would be achieved. Whereas crude stood at about $147 a barrel in mid-July, it now hovers about $90 lower. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at about $54 per barrel.

"We believe the fair price for oil is $75 a barrel," he said, without elaborating on how this would be achieved. Whereas crude stood at about $147 a barrel in mid-July, it now hovers about $90 lower. On Friday, the U.S. benchmark West Texas Intermediate crude for January delivery was trading at about $54 per barrel.

The king was echoed by Qatar's Oil Minister Abdullah Bin Hamad al-Attiya, who told the Arab news channel Al-Arabiya just before the opening of the meeting of the Organization of Arab Petroleum Exporting Countries Saturday that prices needed to rise to guarantee investment into the oil sector.

"The price between 70 to 80 (dollars a barrel) is the one encouraging in investment and developing new or current oil fields. It falls below 70, the investment would freeze, which will lead to a crisis in supply in the future."

The representatives of the OPEC face their third test in as many months to engineer a rebound in prices hammered by plummeting crude demand amid a global economic meltdown.

The cartel has already held one emergency meeting -- on Oct. 24 in Vienna -- to try to halt the slide in prices with an announcement of a 1.5 million barrel per day drop.

It failed to support prices, and the cartel hastily convened the Cairo gathering on Saturday on the sidelines of the OAPEC meeting.

Kuwait's oil minister Mohammed al-Aleem said Friday he believes there was "no need" for OPEC to take a decision in Cairo on cutting output. But he warned the market is oversupplied, and didn't rule out the need for OPEC to cut production further.

"We believe a decision could be taken ... but I think it will happen in Algeria," he said.

Al-Aleem said current prices could undercut investment in future projects and were not good for either producers or consumers.

The recent price drop has left price hawks Venezuela and Iran clamoring for further reductions of at least 1 million barrels a day. Both countries need crude of about $90 per barrel to meet current spending needs aimed in part at propping up domestically unpopular regimes.

Other OPEC members, such as Nigeria and Ecuador, face budget problems too, making them reluctant to implement more cuts that might shrink revenues further.

Unlike many of their fellow members, the Saudis are better positioned to cope with the drop in prices. The International Monetary Fund estimates Riyadh needs crude in the range of about $50 per barrel for 2008 fiscal accounts to break even.

Also unclear, after two earlier cuts failed to push prices higher, is what the group can do without prolonging the global economic downturn.

OPEC itself, along with the International Energy Agency, has significantly revised down its projections for demand growth in 2009.

Meanwhile, global crude inventories are growing, as evidenced by a U.S. government report showing a surprisingly large 7 million barrel build in stocks last week in the world's largest energy consumer.

OPEC's last round of cuts would put its total production at about 30.5 million barrels per day, according to the IEA. That is about 500,000 barrels per day higher than the forecast call on OPEC crude in much of 2009.

Those factors argue against restraint if some in OPEC want crude back up to at least $70.

A Nov. 24 research report by the New York-based Oppenheimer & Co. in New York said that for oil to rebound to $65 a barrel, OPEC would need to cut crude production by more than 3 million barrels per day from its September levels -- a move it called highly unlikely.