Business | Oil & Gas
Japan and India cool to Saudi suggestion of $75 crude target
Big Asian oil consumers India and Japan gave a cool response yesterday to Saudi Arabia's suggestion that $75 (Dh275.25) a barrel was a "fair" price for oil, saying cheaper crude was preferable during the worst econ-omic crisis in generations.
- Reuters
- Published: 23:25 December 2, 2008
Tokyo/New Delhi: Big Asian oil consumers India and Japan gave a cool response yesterday to Saudi Arabia's suggestion that $75 (Dh275.25) a barrel was a "fair" price for oil, saying cheaper crude was preferable during the worst econ-omic crisis in generations.
While stopping far short of suggesting a new price target for the Organisation of Petroleum Exporting Countries (Opec), Saudi Arabia's King Abdullah Bin Abdul Aziz and its oil minister said at the weekend that $75 crude would encourage new oil production from marginal, higher-cost sources, a move that analysts say is necessary to help prevent a possible shortage in years ahead.
Equilibrium
While that is half the $147 a barrel record high hit in July, few in Asia were ready to embrace a higher medium-term equilibrium as they enjoyed $50 oil for the first time in over three years.
"There are frequent comments by oil producers about $60-$75 per barrel," Toshihiro Nikai, Japan's minister of economy, trade and industry, told reporters in Tokyo. "But for us, the cheaper the oil price, the better."
Nikai said he had told oil producers that Japan was struggling in the face of high oil prices, and they had responded by saying they also wanted to stab-ilise them.
R.S. Pandey, India's oil secretary, also cited volatility in the market as the greater concern.
"As a major consuming nation we would like prices to remain stable and around this level," he said, declining any direct comment on his view of $75.
"What is more important is there has to be stability in prices. Volatility of the kind witnessed this year has been very bad."
The weekend comments from King Abdullah and Oil Minister Ali Al Nuaimi were a surprise to many analysts as the the world's biggest oil exporter has for years studiously avoided giving any signals on what it believes might be a sustainable long-term oil price ever since crude broke Opec's $22-$28 band.
With investors worldwide spooked by the prospect of recession and Japan seemingly on course for its longest-ever econ-omic contraction, a higher oil price would make things even tougher.
"Against this background, I think a rebound in crude prices again would be unbearable," said Shigeru Suehiro, a senior econ-omist at Japan's Institute of Energy Economics.
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