Bloomberg News
written by Grant Smith and Fred Pals
Friday October 15, 2010
The 13 percent DECLINE in the Dollar Index since June has led some OPEC members to call for oil to rise to $100 a barrel.
The U.S. currency’s weakness means the “real price” of oil is about $20 less than current levels, Venezuelan Energy and Oil Minister Rafael Ramirez said after yesterday’s meeting of the Organization of Petroleum Exporting Countries in Vienna. The group, which accounts for 40 percent of global crude output, left targets unchanged and called for greater adherence to quotas, which are being exceeded by a supertanker load a day.
“OPEC is not interested in compliance right now,” Nordine Ait-Laoussine, the former Algerian oil minister who now runs Geneva-based consultant Nalcosa SA, said in an interview in Vienna. “They’re concerned about the dollar because as the dollar weakens, prices go up. They’re not paying any attention to production discipline.”
The Dollar Index, which tracks the currency against those of six U.S. trading partners, was at 76.48 at 11:08 a.m. in London today, near its lowest level since December, from a 2010 high of 88.405 on June 7. It has dropped 6.1 percent in the past month. The nominal value of OPEC’s net oil export revenue will be $818 billion in 2011, 10 percent more than this year, according to U.S. Energy Department forecasts.
OPEC is exceeding its own quotas as prices rise above the $70-to-$80-a-barrel band that Saudi Oil Minister Ali al-Naimi said is “ideal.” The International Energy Agency estimated that the group achieved 54 percent of its promised supply cuts in September.
‘Love’ $100
Shokri Ghanem, chairman of Libya’s National Oil Corp., said a higher crude price would help OPEC offset the loss of revenue from the weaker dollar.
“We would love to see $100 a barrel,” Ghanem said yesterday in Vienna. “We’re losing real income. Libya in particular would like to see a higher oil price.”
Kuwaiti Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said in an interview this week that $70 to $85 is the “most comfortable” range, while his Algerian counterpart, Youcef Yousfi, said between $90 and $100 is “reasonable.”
Crude for November delivery rose 3 cents to $82.72 a barrel in electronic trading on the New York Mercantile Exchange today, paring yesterday’s 0.4 percent decline. Oil gained 9 percent in the past month.
‘Perfect Price’
“So far, the perfect price has been $60 to $80, and now they’re talking about $80 and $100,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “This all tells me OPEC is quite happy with higher prices and quite unhappy with the fall in the U.S. dollar.”
Speculation that the Federal Reserve may further loosen monetary policy through so-called quantitative easing has weakened the dollar. Fed Chairman Ben S. Bernanke, who will be speaking in Boston today, said Oct. 4 the central bank’s first round of large-scale asset purchases aided the economy and further buying is likely to help more.
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