High oil price eases threat of Opec supply cut

Strong prices mean Opec oil producers meeting later this week may be able to resist cutting output even though world supplies are running in excess of demand, cartel ministers said on Monday. "On our oversupply there are different figures, but everyone agrees there is oversupply. But this does not mean we're going to cut (production)," said Iran's Oil Minister Bijan Zanganeh.
Oil prices jumped within a dollar of $50 a barrel on Monday as a blizzard enveloped the US Northeast, boosting demand for heating oil. US light crude rose 53 cents to $49.06 a barrel.
"They (prices) are higher than our projections," Zanganeh said. Iran is Opec's second largest producer behind Saudi Arabia, which has yet to state its position.
Iran's Zanganeh said that Opec preferred to keep the price of its reference crude basket - last valued at $41.63 a barrel - below $40.
"Opec is thinking under $40," he said when asked about what price best suited the Opec basket. Earlier this month Zanganeh said no Opec member wanted to see the cartel's basket price fall below the $34-$35 range.
Indonesia's Oil Minister Purnomo Yusgiantoro said on Monday current price strength means Opec should maintain existing production limits at Sunday's meeting.
"We will see the development before the Opec meeting in Vienna. However, with the current market development, Opec should roll over the current quota because the oil price is still high," he told reporters.
"The oil price is still high because the market is worried about the elections in Iraq and also because of the cold weather in the US Hopefully prices will go down in the second quarter," he said.
Opec is keen to avoid an excessive stockbuild during the second quarter when demand ebbs after the northern winter. The cartel's latest forecast projected that stronger-than-expected demand growth should help keep inventories under control.
Opec's monthly report on Friday projected the cartel's current production levels will generate only a modest 1.4 million barrels per day increase in inventories.
This is far smaller than huge second quarter builds forecast at this time last year, which spurred Opec into surprise supply cuts. Those cuts helped fire oil's 34 percent rally during 2004 as Chinese and US demand growth outstripped expectations.
Opec has already agreed to withdraw 1 million bpd of excess supply from January 1 to bolster prices.
Opec oil supply fell 800,000 barrels per day in January to 29.6 million barrels per day, leading tanker tracking consultancy Petrologistics said in its preliminary estimate for the month.
Venezuela has said it would support an Opec decision to cut oil production at Sunday's meeting if the group agreed such a move was needed.