DOHA // Energy officials from Arab states are playing down a sudden drop in crude prices, stressing instead the need to invest in renewable energy and co-operate on the MENA region's electricity woes. In their opening remarks to the Ninth Arab Energy Conference, held this week in the Qatari capital to coincide with a meeting of the Organisation of Arab Petroleum Exporting Countries (OAPEC), government officials representing the organisation's 11 member countries avoided referring to recent oil price movements.
Nor did they mention the Greek financial crisis that has been troubling the world's commodity and stock markets by sending the euro sharply lower compared with the US dollar. Crude, which is priced in dollars internationally, becomes more expensive to the holders of currencies that weaken against the dollar. Thus, the dollar's recent surge against the euro is believed to have been the main factor behind a 13 per cent drop in crude prices last week.
Traders also worried the euro zone debt crisis could derail global economic recovery, causing the fragile rebound in oil demand of the past few month to stagnate. The main crude futures contract on the New York Mercantile Exchange dipped below $75 a barrel on Friday, the lowest level since mid-February, just five days after topping $87. That was the biggest weekly drop in almost 18 months. "Right now we are seeing a volatile price and we will have to live with it for some time," Abdalla el Badri, the OPEC secretary general, said yesterday on the eve of the OAPEC meeting.
OPEC would stick with the output target it set in December 2008, he added. "We have to abide by that decision, so I am calling for more compliance." More than half the members of OPEC also belong to OAPEC. On the sidelines of the conference yesterday, Ali al Naimi, the Saudi oil minister, said oil demand was strengthening and he expected that to continue this year, stabilising prices. Qatar's oil minister Abdullah al Attiyah and the Algerian oil minister Chakib Khelil said that although the Greek situation was weighing on crude prices at the moment, that was not a reason for OPEC to act. Last week's drop in crude prices had nothing to do with market fundamentals, they said.
"All this economic uncertainly has led to a decline in the oil price," Mr Khelil added. "I don't think we need to step in." He predicted crude would average between $80 and $85 a barrel for the rest of this year. Mohammed al Hamli, the UAE Minister of Energy, said: "Prices move up and down. It's a natural correction." Mr al Hamli added there was no need for OPEC to convene before its next scheduled meeting in October.
But Sheikh Ahmed Abdullah Al Sabah, the Kuwaiti oil minister, said the group might need to call an emergency meeting if crude fell below $65 a barrel. OPEC has kept its production target unchanged at its past five meetings, the most recent of which was held on March 17 in Vienna. @Email:tcarlisle@thenational.ae