OPEC has further pressure on it to cut oil output at its ministerial meeting in Vienna next week after Iran’s OPEC governor publicly claimed that $100 is the lowest “appropriate” price for a barrel of oil, in current markets.
Mohammad Ali Khatibi, oil minister of the world’s fourth-larges crude producer, was speaking in the context of the price of Brent crude falling by $1.77 to $104.30 on Friday, while U.S. oil also declined to $106.12.
Meanwhile, New York's main contract: light, sweet crude for October delivery, fell $1.80 to $106.09 dollars a barrel.
Oil is now trading nearly 30 % lower than its record peak of $147.27, reached on July 11, and is once again nearing the $100 landmark, which was only breached for the first time at the beginning of the year.
OPEC governor Mohammad Ali Khatibi reiterated Iran's view that the 13 OPEC member nations should cut output to their agreed targets so that oversupply on the market would be reduced.
Mr. Khatibi, said: “The $100 per barrel price, in the current conditions, is appropriate." He added that the price: "Should change based on conditions and expenses that are created in the future.”
Market analysts expect OPEC producers to stringently protect the $100 a barrel price at next week’s meeting, against a backdrop of rapidly falling crude prices and the strengthening dollar.
The U.S. Department of Energy said crude stockpiles dropped by 1.9 million barrels in the week ended August 29, ahead of the consensus forecast for a fall of 300,000 barrels.
Distillates, which include heating fuel, fell 400,000 barrels - less than the expected drop of 600,000.
Distillates are being watched closely by the market ahead of the northern hemisphere winter when demand for heating - as certain as death creeping up upon us and taxes rising - will increase.
Robert Laughlin, analyst at MF Global, said that OPEC had ridden the wave of prosperity when prices rose aggressively, “But will be alarmed at the downturn in demand and the deteriorating economic backdrop of the global economy.
“Western leaders will be urging the cartel to remain unchanged in production strategy but I fear there is growing feeling in the ranks of price hawks that a cut in production is required and now,” Mr. Laughlin added.
At the moment the 13 OPEC member nations remain split on production cuts.
The alliance in favour of cutting production has been lead by Venezuela. Iran has also come forward and said the producer group may need to cut supplies by as much as 1.5 million barrels per day (bpd).
Even the more moderate Saudi Arabia, which has come forward and said it would prefer for output to remain unchanged, has found itself cutting the discount at which it sells Arab heavy – a poor quality crude that is used to calm the oil price – offering large quantities at discounted rates.
In adamant contrast Ecuador's oil minister, Galo Chiriboga, has said that output levels should remain untouched.