There is no fundamental justification for oil at $100 a barrel and Organisation of the Petroleum Exporting Countries (Opec) member Nigeria is assuming that prices will not last at this level, Oil Minister Odein Ajumogobia said on Saturday.
Ajumogobia, who is heading to Riyadh next week to attend an Opec summit of heads of state on November 17, said that no one in the oil exporters’ group would be surprised if the price fell to $80 in the next few weeks.
”$100 oil was speculated about three, four, five months ago and we are there now. There is no indication why it has reached $100 in terms of supply and demand indices,” he said in a telephone interview.
Oil futures in New York struck a record high of $98,62 a barrel on Wednesday, having risen from below $50 at the start of the year. Prices have jumped on a mixture of speculative flows, a weak dollar, falling oil inventories and geopolitical risk.
Ajumogobia said there is no indication that $100 oil has had an impact on demand, but he said Opec is concerned not to undermine economic growth. Opec supplies one-third of world oil.
France on Saturday called on oil-producing countries to increase both output and exploration because of rising demand.
Economy Minister Christine Lagarde said she wants the issue discussed at a meeting of European Union finance ministers on Monday and at a Group of 20 meeting in South Africa at the end of next week.
Asked about the chances of an increase in Opec oil supply before the end of this year, Ajumogobia said: ”That will be indicated by how severe the winter is and other factors.”
He added: ”What we are looking for is a trend. Because we are going down a road no one has been down before, it is difficult to see a trend.”
After next week’s summit in Saudi Arabia, Opec oil ministers are expected to hold a formal conference to review output levels in Abu Dhabi on December 5. ”I don’t think it would shock anyone if by the time we meet in Abu Dhabi the price is down to $80 or $85,” Ajumogobia said.
”Our budget benchmark [for 2008] is $53,80, so we are being reasonably conservative in terms of ‘this is not a trend that is going to continue’. That is the assumption. I don’t see that oil is going to go back to $40, but I think $100 is excessive,” he said.
Ajumogobia had previously said he did not rule out the idea of Opec ministers holding a formal conference that could take action on output at next week’s summit.
But on Saturday he said: ”There is no indication there is going to be a formal meeting in Riyadh, because it is a heads-of-state summit. There is no indication it is going to be anything other than that.”
Ajumogobia said Nigeria will lobby Opec for a bigger supply quota — currently 2,163-million barrels per day (bpd) or 7,94% of Opec’s total for 10 members — because of new offshore fields now coming on stream.
If security improves in the main producing region of the Niger Delta, Ajumogobia said Nigerian output of crude and condensate could rise from 2,1-million bpd now to three million bpd by the end of 2008. — Reuters