Reuters: Iran is basing the oil price for its 2011/12 budget at around $81.50 per barrel and expects the price of oil to pick up again during the start of the summer season, Iran’s OPEC governor told Reuters on Sunday.
By Amena Bakr
DUBAI (Reuters) – Iran is basing the oil price for its 2011/12 budget at around $81.50 per barrel and expects the price of oil to pick up again during the start of the summer season, Iran’s OPEC governor told Reuters on Sunday.
“We are basing the oil price in out budget which will be finalized in about two to three days at around $81.5,” Mohammad Ali Khatibi told Reuters in a telephone interview, adding that prices are expected to recover as the summer season approaches.
Typically Iran is one of the OPEC members that had always given a preference to higher oil prices in order to support its economy.
By contrast, top oil exporter, Saudi Arabia bases the oil price for its budget on around $50-$55 per barrel, analysts have said.
Over the past week, oil prices had fallen by a record of more than $16 a barrel on demand worries and a move by investors to slash commodities exposures.
On Friday, Brent crude fell $1.67 to settle at $109.13 a barrel in heavy trade, with volumes twice the 30-day moving average.
“One reason for the fall in prices is because the dollar gained strength, and to some degree a stronger dollar does compensate the lower oil price,” said Khatibi, who declined to directly comment on whether the current oil price is considered to be fair to both consumers and producers.
He also attributed the drop in price to reports indicating high unemployment rates in the United States which drove traders into a profit booking frenzy.
“There is such a rush right now with traders to sell out of both oil and gold, but as I said when gasoline demand grows higher in the summer the prices could rise again.”
NO SUPPLY SHORTAGE
Following supply disruptions earlier this year from OPEC member Libya, many of the cartel’s members had stepped in to fill the gap and had repeatedly stressed that the market was well supplied.
“Currently the market is still well supplied and we all agree that there is no shortage,” said Khatibi.
OPEC is due to meet in June, and if supply remains at the current levels there will be no need to boost output, Khatibi added.
“We will continue to watch the market and the geopolitical and economic situation, but if there is no shortage in supply there is no need to increase OPEC supply.”
OPEC cut quotas sharply, effective January 1, 2009, to combat a drop in demand as recession bit, but has since left those formal targets unchanged, which has resulted in a large discrepancy between official and actual output.
(Reporting by Amena Bakr; Editing by Hans Peters)