By Simon Webb
Mohammad Ali Khatibi told Reuters by telephone that the oil market was responding more to fundamentals after a price slide of around 20 percent in less than a month drove out some speculators.
U.S. crude CLc1 has fallen to a three-month low below $120 from a record above $147 in July on concern that demand will suffer from an economic slowdown. Despite the fall, the price is still nearly $50 higher than a year ago.
"We have movement from two sides impacting prices," Khatibi said. "On the one hand demand expectations are shrinking and on the other hand OPEC production is increasing and the result is clear. You have weak prices."
Oversupply was about 1.3 million barrels per day but seasonal heating demand in the fourth quarter should balance fundamentals, he added.
"The market will be well balanced," Khatibi said. "There won't be any shortage in winter."
He declined to say if he thought the Organization of the Petroleum Exporting Countries (OPEC) should change its output at its next ministerial meeting in Vienna on September 9.
"That's for the ministers to decide," he said.
An OPEC source on Tuesday said the group, supplier of more than a third of the world's oil, was unlikely to change output at the September meeting to reverse the recent price fall unless the slide continues below $80 a barrel.
OPEC's oil output rose in July for the third consecutive month as top exporter Saudi Arabia pumped at its fastest rate since 1981.
FUNDAMENTALS
OPEC blamed factors beyond its control such as weakness in the U.S. dollar, international political tension and investment flows into commodities for the run up in oil prices.
Those factors have eased and returned the fundamentals of supply and demand to the fore, Khatibi said.
"The dollar, speculation, geopolitics – their influence has decreased," he said. "The role of fundamentals is stronger than the role of non-fundamental factors."
The U.S. dollar hit a six-week high against the euro this week and a seven-month high against the yen. The weak dollar had encouraged investors into commodities as a hedge against inflation.
Iran has been the focus of the international tension that helped push the oil price higher because of fears that the dispute with the West over Iran's nuclear ambitions would escalate into conflict and disrupt oil exports. Iran is the world's fourth-largest crude exporter.
Softening rhetoric in the dispute last month contributed to oil's slide. The U.S. said on Wednesday that major powers had agreed to consider more U.N. sanctions against Iran.
(Reporting by Simon Webb; editing by James Jukwey)
