Oil glut hits price, $100-$120 reasonable: OPEC chief

A huge surplus of oil has knocked oil down towards double digits, OPEC’s president said on Monday, and a level of $100 to $120 a barrel is more reasonable.

Abdul Kareem Luaibi, who serves as oil Minister of Iraq, also said Baghdad would export 2.9 million barrels per day next year - up from 2.4 million bpd now.

That implies output of 3.4 million bpd, which would allow Iraq to overtake Iran as OPEC’s second biggest producer. Iran’s production has sunk to its lowest in two decades due to Western sanctions against its nuclear programme.

“It’s very clear there is a tremendous surplus that has led to this severe decline in prices in a very short time span,” Luaibi told reporters. “This will not serve anyone.”

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Luaibi said he saw a range of $100 to $120 a barrel as a “reasonable and acceptable” price level.

Oil is now trading at about $100 a barrel after falling back from a four-year high of $128 in March. Worries about the slow pace of global economic recovery have helped depress prices.

The OPEC president declined to comment on what course of action the 12-member group would take when it meets on Thursday, saying only that ministers would decide after a comprehensive review of market conditions.

But others, notably price-hawk Iran, have been more vocal. Tehran has blamed Saudi Arabia, Kuwait and the United Arab Emirates for the decline in prices and accused the Gulf Arab states of over-producing.

Top oil exporter Saudi Arabia has been pumping above 10 million bpd, a 30-year high, to help drive the price down to $100 - a level it feels is ideal - and cushion consumers from a loss of supply from sanctions-hit Iran.

But there are signs that Riyadh could be turning down the taps. The kingdom pumped 9.8 million barrels per day (bpd) of crude oil in May, an industry source said on Saturday.

Supply from OPEC is running nearly 2 million barrels per day above a self-imposed production ceiling of 30 million bpd and is at its highest since 2008.

Venezuelan President Hugo Chavez said on Saturday he was worried about OPEC members violating their oil production quotas after oil fell last week below the $100 per barrel level the country sees as fair.

Algeria, which also prefers higher oil prices, has suggested the group should cut output.

Reuters