The comments are the first indication from the Organisation of the Petroleum Exporting Countries of how long it can withstand oil at $ 50, below the $ 70-$ 75 many in Opec and the oil industry say is needed to encourage investment in new supply.
“We cannot really invest at current oil prices. Maybe we can live with it this year,” Abdullah el-Badri told a conference in Paris. “The cost of adding new capacity is still high.” He added: “2009 is the most difficult year for the world to live.”
While painful for producers, cheaper oil equates to a large economic stimulus for consumers and oil producers stand to benefit in that a stronger economy encourages demand for fuel.
When it met in March, Opec decided against a new output reduction to bolster prices, saying it was waiting to see the outcome of a G20 summit – taking place in London yesterday – that investors hope will deliver measures to restore growth.
Qatar’s Deputy Premier and Energy Minister, who is also attending the Paris conference, made similar remarks to Badri’s.
“I say the current price of $ 50 is more pragmatic related to the world economic crisis,” HE Abdullah bin Hamad al-Attiyah said. “We cannot be dreamers.”
He said: “$ 50 a barrel is pragmatic in 2009. I am not talking about the price I want.”
Oil has fallen from a record high above $ 147 a barrel last year as the global economic crisis has eroded demand. Crude was trading above $ 50, up more than 5%, yesterday as rising equities and the G20 meeting bolstered sentiment.
Prices have also recovered from a low last year of $ 32.40 after Opec agreed since September last year to reduce oil output by 4.2mn barrels per day, about 5% of daily world demand, to support prices.
So far, it has met that commitment by just under 80%. It next meets at the end of May to reassess the balance of supply and demand.
Opec has repeatedly warned the drop in prices will hurt investment, threatening shortages and forcing up prices just when the economy and demand might be recovering.
Its members have delayed 35 projects to expand supply, Badri said in February.
At yesterday’s Paris conference, Total CEO Christophe de Margerie said many oil companies were delaying big projects to preserve cash and his company might not meet its plan to invest $ 18bn this year.
