Iraq’s oil minister said Tuesday that world crude prices are “reasonable” and are high enough to encourage oil investment without hurting the global economic recovery.
Hussain al-Shahristani’s remarks in an interview with The Associated Press added to perceptions that OPEC is not eyeing any immediate changes in output despite the past weeks’ large price swings.
The 12-nation group has left its output targets unchanged for about a year-and-a-half, fearing that any sharp revisions could undermine slow gains as the world struggles to emerge from its worst recession in over six decades. It is scheduled to meet next in October.
Al-Shahristani said there has been “good progress” in the economic recovery and oil prices are not impairing that process.
“On the one hand it (oil price) is sufficiently high to encourage investment, to develop marginal fields, mostly outside of OPEC countries,” al-Shahristani said. He stressed that it was important that there be “production from other regions and areas, to reduce total dependency on OPEC output.”
“On the other hand it is not too high to adversely affect the recovery of the world economy,” he said. “I think we are at the right balancing point.”
The benchmark crude oil futures contract for July delivery was trading near $72 a barrel in late trading in Europe. That is within range of what OPEC kingpin Saudi Arabia and others in the producer bloc say is a reasonable price for producers and consumers.
Prices have fallen from $87 per barrel in the span of weeks on worries that Greece’s debt crisis could spread to other European countries, undercutting the economic recovery.
The drop in prices, however, carries serious implications for Iraq, which sits atop the world’s third largest proven reserves of conventional crude oil.
After years of sanctions and war, Iraq has staked its economic recovery on developing its oil sector.
Oil revenues make up nearly 95 percent of Iraq’s income. The Baghdad government is relying on 12 deals with international oil companies, 11 of which were the result of two international bidding rounds last year, to dramatically increase oil output in future years.
But the lack of a petrochemical law, ongoing insurgent attacks and uncertainty about who will lead the next government continue to be challenges to developing the oil sector.
The oil minister said he expected the country’s oil production capacity would climb to over 12 million barrels per day in six years.
Analysts, however, say that level is unrealistic given continuing security issues and the condition and limits of Iraq’s current oil infrastructure, including pipelines.
Al-Shahristani said Iraq was taking steps to boost its export infrastructure.
Earlier Tuesday, Iraq’s Supreme Court ratified election results from the country’s March 7 contested parliamentary vote, clearing the way for a new government to be formed. The court ratified the results and declared a secular alliance led by former Prime Minister Ayad Allawi the winner.
Al-Shahristani, a key supporter of Prime Minister Nouri al-Maliki’s State of Law coalition, said he is not pursuing any position with the new government should the premier retain his job. But he said he would consider staying on if al-Maliki asked.
( Associated Press )