Oil’s slide below $100 a barrel on Monday adds to financial worries for OPEC members, prompting some in the producer group to voice concern about too much oil in the market even if they see the current fall as short lived.
Brent crude fell below $100 a barrel for the first time in 14 months, hit by concerns about slower economic growth and ample supply. Top OPEC exporter Saudi Arabia favours oil at $100, which many others in the 12-member group also support.
For now, Organization of the Petroleum Exporting Countries delegates said on Monday they were not alarmed, expecting winter demand to support prices. But signs of concern are emerging about the level of supplies.
“As with concern about the drop in oil prices it was a result of weak demand and oversupply mainly from the U.S., recovery in Libya, Nigeria and Iran,” said an OPEC delegate.
“But the geopolitics is there and cold weather is approaching, which will support prices,” the delegate added.
The United States shale oil boom is inflating global supplies. Within OPEC, Libyan output has risen and Iraqi exports have mostly continued flowing despite conflicts in those countries, while output has edged up in Nigeria and Iran.
Another OPEC delegate said prices were under pressure from too much oil, something some member countries were watching. However most OPEC officials contacted by Reuters continued to see the price drop as short-lived.
“The fall in prices is a temporary thing. They are still within the acceptable range. There is no real worry,” said a delegate from one of OPEC’s Gulf members.
OPEC does not have an official price target and prices still need to fall further to be outside an acceptable zone cited by Saudi Oil Minister Ali al-Naimi in June, when he said oil at “$100, $110, $95 is a good price.”
Estimates from the International Monetary Fund indicate that while current prices are comfortable for OPEC’s core Gulf members, they are below levels members including Iran, Algeria and Iraq need in 2014 for their fiscal balance to be zero.
But estimates from Arab Petroleum Investments Corp, a Organisation of Arab Petroleum Exporting Countries body that finances oil investment, put the break-even level for number one producer Saudi Arabia much closer to current prices at $98.40, and the OPEC weighted average at $104.80.