30/05/2009
VIENNA/MUNICH, May 29 (Reuters) - The biggest monthly oil rally in a decade stoked OPEC confidence higher prices would be reached before the year was out, although ministers said on Friday they were still monitoring bloated fuel stocks.
Oil rose to a six-month peak above $66 on Friday and was on course for its highest gains in a month since 1999.
OPEC Secretary General Abdullah al-Badri told a breakfast briefing the market could be at $70-$75 before the end of the year.
"If this current trend continues, this recovery as we see it coming now, I think, by year-end, we'll see prices in the range of $70 to $75 a barrel," Badri told reporters.
After Thursday's OPEC meeting, Saudi Arabian Oil Minister Ali al-Naimi announced the group had decided to "stay the course" and stick with existing production targets.
He also said he believed $75-$80 could be hit this year, roughly the level producer countries have said is needed to ensure investment in new supplies.
Libya's most senior oil official Shokri Ghanem was still more bullish, predicting in an interview with Reuters on Thursday oil could climb above $85 a barrel.
MOOD SHIFT
The mood that has surrounded the May meeting of the Organization of the Petroleum Exporting Countries is very different from that when the group met two months ago.
In March, the price was below $50 a barrel and the fragility of the world economy made ministers anxious about weak fuel consumption and high inventories, but also wary of driving prices to levels that would destroy demand further.
Since then, growing optimism the worst economic news has past has spurred financial and commodity markets.
This month's oil rise -- approaching 30 percent, according to Reuters data -- is the biggest monthly jump since the nearly 37 percent rally of March 1999.
While bullish sentiment has encouraged buyers, OPEC has also played a major role in supporting the price.
It has kept output targets steady at its last two meetings, but in December announced a record production cut.
In all, it has promised reductions of 4.2 million barrels per day since September and analysts estimated it has delivered roughly 80 percent of those curbs.
Even so, inventories are still high and in days of forward cover equate to 62.4 days, according to the International Energy Agency, around 10 days more than OPEC considers comfortable.
Noting the stockpile, United Arab Emirates Oil Minister Mohammed bin Dhaen al-Hamli said "this has been a huge crisis".
Asked when stocks would fall, he said that would happen once demand recovered and added there were already hints of greater fuel use.
"We believe there are signs of recovery in the world economy. I really don't know when demand will pick up, but the signs are there. Asia is an area of (such) signs," Hamli told Reuters on the sidelines of a conference in Munich on Friday.
"We are almost at the end of the second quarter. This is when the driving season begins in the U.S.," he added.
From a producer's viewpoint, oil prices are well above that required to make fields already onstream profitable, even if they are still below the cost arguably needed for the most expensive new output, such as Canadian oil sands.
"Some say prices are not high enough for investments, others are more comfortable," Hamli said.
Still mindful of last year's records of nearly $150 a barrel, which proved unsustainable and destroyed fuel demand, officials said they would temper the rally if it threatened to get out of control.
"If the prices go high and the stocks go below 52 days, I think OPEC will take a positive decision not to hinder the economic growth of the world," Badri said.
But he added he did not expect stocks to fall to that level before the end of the year or the first three months of 2010.
