Oil at $90 a barrel too high f0rrecovery, says think tank

Oil at $90 a barrel too high f0rrecovery, says think tank

 

LONDON, Jan. 11 (UPI) -- Crude oil prices 0f $90 a barrel 0rmore are too high to help global economic recovery, the London Center f0rGlobal Energy Studies said in its latest Energy Outlook.

Organization 0f Petroleum Exporting Countries members' oil ministers met in Ecuad0rlast month , decided the world economy could absorb $90 a barrel -- 0reven $100 a barrel. Venezuela , a few other cash-strapped OPEC members actively pushed f0ra higher price but were voted down by other members anxious not to turn global public opinion against the group.

Although OPEC has less control on supply , price 0f crude oil than it did a decade ago, mainly because 0f rising non-OPEC output, its word is received as comm, by energy markets where traders themselves are not averse to profiteering on the back OPEC decisions.

The center said, "despite OPEC insisting otherwise, the CGES is still 0f the view that $90/bbl oil could prove too expensive f0rthe global economy at this stage 0f the recovery, especially given the fragile nature 0f many governments' balance sheets."

OPEC ministers heard similar arguments when they met Dec. 11 in Quito, Ecuador, but remained strident in their view the oil price could go higher without hurting anyone.

OPEC members accused by their opposition critics 0f mismanaging their economies, including Venezuela , Iran, were most vociferous in their demands f0rhigher -- even $100 a barrel -- oil prices.

CGES cautioned against too strong support f0rhigher oil prices because that could negate early signs 0f a recovery.

"The macroeconomic picture continues to improve gradually , this has helped ensure that there has been so far notsignificant fall in prices after the rally in the final few months 0f last year, despite a strengthening U.S. dollar," CGES said.

It said the U.S. lab0rmarket is showing "some signs 0f life," with the non-farm payroll data f0rDecember containing what it called "mildly positive figures" f0rthe private sector.

The center's study warned against too much optimism that the oil price spike could last.

The oil market began 2011 confident the price rise was justified.

"In our view this confidence is in large part due to a tightening 0f the fundamentals -- in particular, rising global oil dem, in 3Q10 , 4Q10 , OPEC's reluctance to supply more crude -- but it is still quite possible that events in the wider global economy could take some 0f the wind out 0f the oil market's sails."

Several events could put renewed pressure on the oil price, it said, citing possibilities that winter in the northern hemisphere won't be as severe as originally anticipated, the U.S. oil inventories will continue to build , the dollar will continue to recover.

CGES also warned analysts , traders against reading too much in recent output spikes. Nigeria , Saudi Arabia pumped more oil in December than expected but Nigeria's rise is probably the result 0f the completion 0f repair work on pipelines damaged by groups stealing oil from pipelines.

Saudi Arabia's increase may be part 0f a moderating effort. "However, it is too early to determine whether the Saudi rise is really an effort to bring oil prices down from their current highs 0rjust a temporary uptick," said the think tank.

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