Iraq sets $90 as threshold for oil price

Global oil prices below $90 a barrel would be difficult to accept, Iraq’s Deputy Prime Minister for energy told Reuters on Wednesday, in a sign that a slide in prices is starting to worry some OPEC members.

Brent crude oil dipped below $100 a barrel on Tuesday on growing concern about a Greek debt default and the health of the global economy. Prices have tumbled from a 2011 peak of $127 reached in April.

“Oil prices have slumped to their lowest acceptable levels, and it would be really difficult to accept prices below $90,” Iraq’s Hussain al-Shahristani said.

Shahristani also told Reuters he saw no need for the Organization of the Petroleum Exporting Countries to review its crude output at its next meeting in December and no reason at present to trim production.

In a further indication of concerns about falling prices, an official from Iran raised the possibility of OPEC holding an emergency meeting if prices continued to fall, as he expected.

While $90 oil is close to some producers’ pain threshold, analysts said the chance of a change in OPEC output is remote as its core Gulf Arab members show no concern about prices and little appetite for an early OPEC meeting.

“I think that for Iraq, Iran, Venezuela, Algeria − usual price hawk countries − $90 is where they will start expressing concern publicly,” said oil consultant Bill Farren-Price of Petroleum Policy Intelligence.

“But $90 is not necessarily a floor that is shared by Gulf producers. There are some Gulf producers who do not expect it to go below $90, and even if it did, they would not be rushing towards Vienna.”

OPEC is scheduled to meet on Dec. 14 at its Vienna headquarters. Oil climbed back above $101 on Wednesday as an agreement by European finance ministers to safeguard their banks reassured investors.

Early meeting?

Iran holds the rotating OPEC presidency in 2011. Its OPEC governor said on Wednesday an emergency OPEC meeting would be what he described as a “natural” event if prices continued to fall.

“At the moment some concerns have emerged, and if the downward trend of prices continues, naturally an extraordinary meeting can be expected,” Mohammad Ali Khatibi told the Donya-ye Eqtesad daily, an Iranian economics newspaper.

OPEC Gulf Arab producers Saudi Arabia, Kuwait and the United Arab Emirates, however, have so far shown no sign of concern about falling prices. Two Gulf OPEC delegates on Wednesday dismissed the need for an early meeting.

The Gulf producers boosted output unilaterally after Iran, African countries and Venezuela blocked a Saudi-led proposal to increase output targets at OPEC's last meeting on June 8.

Having provided extra barrels to help offset the loss of Libyan supplies, without a formal OPEC agreement, they are likely to reduce their output quietly if they decide there is too much oil in the market.

A Reuters survey found no sign that Gulf members reduced supplies in September. Saudi Arabia's oil minister, Ali al-Naimi, said on Saturday the oil market was balanced, the state news agency SPA reported.

One senior official told Reuters last week the Gulf producers were unlikely to reduce supplies to try to stem a decline in oil prices unless crude falls below $90 for a sustained period.

OPEC’s Gulf members are typically the organization’s most moderate on prices because they do not want high energy costs to restrict economic growth and curb long-term demand for their main source of export revenue.

Others including Iran, Venezuela and Algeria have lesser oil reserves and bigger populations and prefer to keep prices as high as possible.

A delegate from one of OPEC’s African members made similar comments to Iraq's, pointing to $90 as a threshold level.

“For the time being until December, it’s wait and see,” the delegate said. “A price between $90 and $100, we can live with it. Below $90 is a little bit worrying.”