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Saturday, December 11, 2010

OPEC leaves oil quotas unchanged seeking $100 a barrel

OPEC decided to leave production quotas unchanged in a meeting in Ecuador's capital Quito Saturday, stressing looming "risks to the fragile global economic recovery."

The 12-nation Organization of the Petroleum Exporting Countries said in a statement that the economic growth that had pushed oil to above 90 dollars a barrel this week was likely to slow next year.

That, and the challenges to the world's recovery from the 2008 financial crisis, "would negatively impact on oil demand," it said.

OPEC highlighted "the adverse risks of possible currency conflicts and fears of a second banking crisis in Europe" along with low industrial output in developed countries, high unemployment and "ample spare capacity throughout the oil supply chain."

The cartel at the same time said it was "comfortable" with current prices.

Oil futures trading Friday finished at 90.48 dollars in London trade for delivery in January. New York's main contract, light sweet crude for January, finished at 87.79 dollars a barrel.

"There is a general feeling in the market that the current prices are comfortable for producers and for consumers," said OPEC's current president, Ecuadorian Oil Minister Wilson Pastor-Morris.

He noted that, for all the "cautious optimism," though, "nothing can be taken for granted."

Stronger-than-expected demand attributed to a harsh winter hitting Europe and parts of North America was pushing oil prices higher this year, as was growth in China and other developing nations.

But OPEC said speculation was also fueling the rise.

And observers said economic uncertainties suggested the rally might not last, with fears rising that China's economy was at threat by soaring inflation.

The International Energy Agency said Friday that "global demand growth should ease in 2011, from 2.5 million barrels per day to 1.3 mbd, amid renewed structural OECD decline, and as post-recession froth in markets like China subsides," the IEA said.

OPEC's decision meant it would maintain production at 24.8 million barrels per day, the level set after a hefty quota cut in January 2009 to cope with a collapse in oil prices caused by the financial crisis.

The organization accounts for nearly 40 percent of the world's oil output.

Some OPEC members -- Iran, Venezuela and Libya -- were urging higher prices, to above 100 dollars a barrel to offset what they said were rising production costs.

But OPEC heavyweight Saudi Arabia differed, with its oil minister, Ali al-Nuaimi, telling reporters he thought "70 to 80 (dollars per barrel) is a fair price."

OPEC Secretary General Abdalla Salem El-Badri told a news conference that it was up to the markets to set the price according to supply, but noted that the dollar has been steadily losing value.

"This price we see at this time has not damaged world growth," he said.

"Yes, in Europe, it is 90 dollars. But they (the Europeans) like it because the price is very low. Who is hurting is our producer countries, because we sell our crude in dollars and buy in euros. So you see how much we are losing," he said.

He added: "The dollar is coming down almost every day."

OPEC set its next meeting for June next year in Vienna.

Iran was taking over the cartel's rotating presidency next year, the first time in 36 years it will have held the leadership.

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