Libya welcomes $100 a barrel oil

February 02, 2011 | Africa, Commodities & Oilprice

opec logoOPEC member Libya rejected on Tuesday the need for OPEC to meet this month in order to discuss raising production, saying that oil at $100 a barrel is justified by a weaker dollar and rising food costs.

Libya’s top oil official Shokri Ghanem hailed higher prices, a stance that was at odds with moderate OPEC members such as Saudi Arabia, which have maintained that they favour prices below current levels.

The head of the International Energy Agency reiterated his call for OPEC to be “flexible” in its policy.

Brent crude hit $100 a barrel on Monday for the first time since 2008 on concern that oil flows through Egypt could be disrupted and that tension could spread into other big producers in the Middle East and North Africa.

The rally has put pressure on the Organization of the Petroleum Exporting Countries to raise output. An OPEC delegate said on Sunday OPEC ministers would hold talks on the sidelines of an energy conference in Saudi Arabia on Feb. 22.

While agreeing with others in OPEC that there was no shortage of oil in the market, Ghanem went a step further to say that $100 oil was necessary to offset higher food costs and the reduced purchasing power of a weaker dollar.

“I don’t think there is a need for a meeting, whether it is a side meeting or an official meeting or extraordinary meeting at this point in time,” Ghanem, chairman of Libya’s National Oil Corp, told Reuters.

Ghanem, who predicted last year oil would rally above $100, said he was happy to see prices back there.

“I am pleased also because it is a good compensation for the loss of the dollar value and the increase in the price of the other commodities, especially the food ones,” he said.

OPEC’s top producer Saudi Arabia takes a relatively moderate stance on oil prices, favouring a price range of $70 to $80. According to the OPEC delegate on Sunday, Saudi Arabia has been raising its production this year.

More hawkish OPEC members, such as No. 2 producer Iran and Libya, say $100 a barrel is no threat to the world economy.

“The market is well supplied, we are not of the opinion of having any action at this point in time,” Ghanem said.

Oil prices have rallied on the perception of a greater risk that the unrest in Egypt could disrupt oil flows through the Suez canal or the Sumed pipeline, which brings Middle East oil to the Mediterranean.

The head of the International Energy Agency, which advises 28 industrialised countries, said on Tuesday the global oil market does not face any emergency but urged OPEC to be “flexible.”

“It is not an emergency now,” Nobuo Tanaka told Reuters. “If a disruption happens, we should act,” he said.