OPEC Delegates See Scant Hope Of Rapid Oil Price Recovery

Growing numbers of OPEC delegates say they expect no rapid recovery in oil prices, even as the market shows signs of a tentative rally from near six-year lows.

One delegate from a country outside the Gulf and a relative price hawk in OPEC said he doubted oil would revisit $100 a barrel this year or next, and that this should encourage less dependence on oil revenue in national budgets.

“Based on supply and demand, the price for this year and next will probably not go beyond $100,” the delegate told Reuters on condition of anonymity. “We have to get a lesson from this. The budgets should not depend on a high oil price.”

The comments come as delegates from the Organization of the Petroleum Exporting Countries and external experts held secretive talks at its Vienna headquarters last week to discuss the 12-country producer group’s long-term strategy. Such meetings do not set production policy.

OPEC’s talks follow its November decision not to cut output despite misgivings from non-Gulf members such as Iran. Back then, Saudi Arabia and its Gulf allies argued that the group needed to ride out lower prices in order to defend market share.

The decision sent prices plunging, extending a decline that began in June and hurting the economies of smaller producers in OPEC, which pumps a third of the world’s oil.

Brent crude has since recovered from a near six-year low around $45 hit in January. Even so, a second delegate from a non-Gulf member was not optimistic about a rapid price rebound.

“What we want is to see the market recovering. Let’s wait until the second half of the year. Then we’ll probably see prices in the range of $60 to $80,” said the delegate, from one of OPEC’s four African members.

Other OPEC delegates, including some from Gulf members, said this week prices may stay depressed until summer, although officials including Secretary-General Abdullah al-Badri have expressed confidence that prices may be bottoming out.

OPEC dropped price targets a decade ago. Top OPEC producer Saudi Arabia’s endorsement of $100 oil in 2012, however, gave rise to a general consensus within the group that it was a fair level.

The group has given little indication of where it sees prices settling in the medium term, although a third non-Gulf delegate said a price aspiration was needed — not so high that it encouraged too much non-OPEC output, and not too low that it hurt higher-cost producers.

“We need to find a price level which could benefit all,” the delegate said. “No oil producer should be driven out of the market as a result of lowering the prices deliberately.”