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12.11.2007 Business & Finance

High Oil Prices Unjustifiable

There is no fundamental justification for oil at $100 a barrel and OPEC member Nigeria is assuming that prices will not last at this level, oil minister Odein Ajumogobia said at the weekend.

Mr Ajumogobia, who is heading to Riyadh next week to attend an OPEC heads of state summit on November 17 told Reuters that no-one in the oil exporters' group would be surprised if the price fell to $80 in the next few weeks.

"$100 oil was speculated about three, four, five months ago and we are there now. There is no indication why it has reached $100 in terms of supply and demand indices," he told Reuters in a telephone interview.

Oil futures in New York struck a record high of $98.62 a barrel last Wednesday, having risen from below $50 at the start of the year. Prices have jumped on a mixture of speculative flows, a weak dollar, falling oil inventories and geopolitical risk.

The oil minister said there was no indication that $100 oil had had an impact on demand, but he said the Organisation of the Petroleum Exporting Countries was concerned not to undermine economic growth. OPEC supplies a third of world oil.

France, on Saturday, called on oil producing countries to increase both output and exploration because of rising demand.

Economy Minister Christine Lagarde said she wanted the issue discussed at a meeting of EU finance ministers on Monday and at a G-20 meeting in South Africa at the end of next week.

After next week's summit in Saudi Arabia, OPEC oil ministers are expected to hold a formal conference to review output levels in Abu Dhabi on December 5.

"I don't think it would shock anyone if by the time we meet in Abu Dhabi the price is down to $80 or $85," Ajumogobia said.

Mr Ajumogobia said Nigeria would lobby OPEC for a bigger supply quota -- currently 2.163 million barrels per day (bpd) or 7.94 per cent of OPEC's total for 10 members -- because of new offshore fields now coming on stream.

If security improves in the main producing region of the Niger Delta, Ajumogobia said Nigerian output of crude and condensate could rise from 2.1 million bpd now to 3.0 million by the end of 2008.

— Credit Reuters