Global demand for oil is back on the rise, making further production cuts by the Opec producers' cartel unnecessary, the Saudi Arabian Oil minister said yesterday.
Speaking in advance of today's Opec meeting in Vienna, Ali al-Naimi, below, said an improving economic climate, particularly in China, is already driving up the price, which broke through the $60 per barrel mark for the first time in six months in recent weeks.
Oil could be back up at $80 per barrel later in the year, according to Mr Naimi. "The price rise is a function of optimism that better things are coming in the future," he said. "We see offshoots of recovery. Demand is picking up, especially in Asia."
The oil price plunged to little more than $30 at the end of 2008, a spectacular collapse from last July's unprecedented $147 high. Opec's 12 member countries, of which Saudi Arabia is the largest, account for 40 per cent of global oil production. They have agreed to output cuts three times since September, taking a total of 3.2 million barrels per day (bpd) out of circulation. Despite suggestions that not all member countries have made the necessary reductions, the price has responded.
But not everyone is as optimistic as Mr Naimi. The International Energy Agency (IEA) predicted earlier this month that world oil demand would drop faster this year than at any time since 1981, revising its predictions downwards by another 160,000 bpd to a total annual contraction of 2.56 million bpd.
Although the initial Opec-agreed cuts did help push up prices, compliance levels are falling as more oil- reliant countries try to cash in on the rising price. IEA estimates for March put compliance at 83 per cent, sliding to 78 per cent by May. Iran and Angola are tipped to be the worst offenders.
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