OPEC is not worried about a slide in oil prices towards $100 a barrel, delegates from the producer group said, with current levels seen as acceptable for producers while higher seasonal demand in the coming weeks was expected to support the market.
Brent crude fell to a 14-month low of $101.11 a barrel on Monday as investor concerns over conflict in Ukraine and Iraq eased and Libyan output rose. The drop brought prices below the level some in OPEC need for their budget needs.
But delegates from three members of the Organization of the Petroleum Exporting Countries told Reuters on Tuesday the decline in prices was not an immediate concern.
“There’s no reason to worry,” said a delegate from one of OPEC’s Gulf members. “We see the dip as a correction. Action will only be taken based on fundamentals and for the time being the price is still fair for producers.”
He did not comment on what price would prompt concern in OPEC. Brent is still above the $100-mark favoured by top exporter Saudi Arabia, which many others in the 12-member group also support.
Prices need to fall further to be outside an acceptable zone cited by Saudi Oil Minister Ali al-Naimi in June, when OPEC last met to review its output policy. Oil at “$100, $110, $95 is a good price,” he said.
An oil official from an African OPEC member took a similar view of the price drop to the Gulf delegate.
“It’s just a seasonal phenomenon,” the official said. “The price will probably go back up in the autumn when demand picks up. There is no reason for panic. Anyway, the price will not go below $100.”
OPEC has a nominal target to produce 30 million barrels per day and in July, pumped around that level, according to a Reuters survey. The organization is not scheduled to meet to review its output policy until November.
But Saudi Arabia, Kuwait and the United Arab Emirates could trim supply informally if needed, such as to make room for a further recovery in Libya or to support prices, said an OPEC source.
In the last few years, OPEC has left its target unchanged and left market management to informal supply tweaks by the three Gulf producers.
“The Gulf countries could cut back if they see a need,” the source said. “Other than that, I’ve not heard of any concern.”