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Oil price could hit $150-170 in coming months

PARIS: The president of OPEC, Algerian Energy Minister Chakib Khelil, forecast on Thursday that oil prices could rise to $150-170 a barrel during the northern hemisphere summer.

If there were real demand for extra oil, the Organization of Petroleum Exporting Countries would do what was needed to satisfy it, he said, affirming that there was enough oil in the world for about the next 50 years. “I predict probably prices of $150 to 170 this summer. It (the market) will probably fall a bit towards the end of the year,” he said in an interview with the France 24 television channel.

Khelil said he did not expect prices to hit $200 a barrel, barring a major market crisis such as a halt in production in Iran. In that case, he added, prices could possibly surge to “$200, 300, 400.” In the short term, he said, “everything depends on the European Central Bank and a decision it could take to raise eurozone interest rates.” “At that time, I think the price of oil will increase.”

ECB policymakers are to meet July 3 when many analysts predict they will decide to raise their benchmark rate by a quarter of a point to 4.25 percent in the face of rising inflationary pressure.

A strong euro, and a weaker dollar, would drive up demand for oil, which is marketed in the US unit and becomes cheaper for holders of non-dollar currencies. Khelil also cited ‘threats against Iran,’ where US and European officials suspect that authorities may be trying to develop nuclear power for military purposes.

“If they (threats) increase, I think the price of oil will rise further this summer as it would coincide with stronger demand for gasoline (petrol), particularly in the United States.”

If a crisis halted production, in Iran, for example, a serious situation would result because no other country could replace Iranian output, he said. OPEC had the capacity to replace three million barrels per day at most, but Iran produced four million barrels per day.

He said the price of oil had risen, firstly because of the fall of the dollar, and secondly because of what he termed geopolitical problems in Iran, Iraq or Nigeria.

The dollar might fall further against the euro by 1.0-2.0 percent, which would probably push up the price of a barrel by $8. He affirmed that there was no problem of oil supply and that there was enough oil to meet world oil demand for about the next 50 years.

If more real demand were evident on the market, OPEC would take the necessary measures to satisfy it. Khelil said that the role of speculation in the rise of prices was no longer contested because even US senators were raising the matter. The problem was the extent of the effect of speculation on the market. afp

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