OPEC: Higher prices not good 

(MENAFN - Arab News) OPEC on Wednesday cautioned that a sustained increase in oil prices above their current level could erode crude demand next year amid a shaky global economic recovery.

Citing continuing signs of a global economic recovery, the Organization of the Petroleum Exporting Countries — supplier of about 35 percent of the world's crude oil — revised its estimate for 2010 global demand growth to 750,000 barrels per day. That's up slightly from its 700,000 barrels per day estimate the previous month.

"Although most of signs are pointing toward higher oil demand," OPEC said in its November Monthly Oil Market report, "a potentially weak economic recovery along with higher oil prices are the two main factors that may dampen world oil demand in the coming year." "Should prices increase and be sustained above the current level, oil demand growth will be pushed down by more than 1 percent in the OECD countries," the report said, referring to the Organization of Economic Cooperation and Development.

The cautiously optimistic projection of rebounding demand underscores the uncertainty lingering in the world energy market. While oil prices have more than doubled since plummeting to the low-$30s per barrel late last year, the world is still far emerging completely from its worst recession in over six decades. The crisis battered oil demand, depriving bloc members of sales of their chief export and source of government revenue.

OPEC's 12 member states have held off from announcing any new production cuts since a series of announcements late last year aimed at cutting their combined output by a record 4.2 million barrel per day. That reduction is credited with helping engineer a rebound in the price of crude, which had collapsed from almost $150 per barrel in mid-2008 to near $30 per barrel by the end of the year. By late afternoon Wednesday Singapore time, the benchmark US crude contract for December delivery was hovering slightly below $79 per barrel in electronic trading on the New York Mercantile Exchange.

Meanwhile, Qatari Oil Minister Abdullah Al-Attiyah said that OPEC was unlikely to substantially alter output plans when it meets next month as oil inventories are high and there is no shortage in the market.

His comments on Wednesday came amid concerns that world oil supplies were getting tighter.

"For the next meeting in Angola, I think OPEC will be very careful to discuss the market situation," he said. "I don't think there will be a dramatic change in the next meeting."

OPEC will meet in Luanda, Angola on Dec. 22 to decide on its oil production policy. OPEC has kept official output targets unchanged at meetings this year, after it agreed to curb output by 4.2 million barrels per day (bpd) last year.

Saudi Arabia, home to the world's largest proven reserves of conventional crude oil, has said it sees $75 per barrel as a fair price for both consumers and producers — a level that will encourage continued investments needed to ensure that supply meets future demand for oil. Other OPEC members have indicated a desire to see prices at closer to $80 per barrel.