Oil may hit $200 if canal closes

CARACAS:Oil prices could more than double to $200 per barrel if the Suez Canal closes because of the crisis in Egypt, though there is no sign of that happening at the moment, Venezuela’s oil minister said.Oil Minister Rafael Ramirez, who is usually hawkish on prices, said OPEC would call an emergency meeting if the canal closed, but he saw no need for such an extraordinary gathering of member states right now despite Egypt’s turmoil. “There is sufficient oil (in the market) and there have been no interruptions, but if they close Suez, that could take the oil price to $200,” Ramirez told reporters on Friday.Egyptian unrest in the past days helped drive Brent crude above $100 for the first time since 2008. Prices slipped on Friday after an apparently unfounded television report that President Hosni Mubarak could be stepping down. Some traders said a correction was due as there was little sign of the turmoil affecting nearby oil producers or disrupting Suez Canal transport.

Ramirez said he was comfortable with prices at current levels of close to $100 per barrel for Brent contracts and said Venezuela was committed to making OPEC members comply with the group’s quotas.“In the current conditions there is absolutely no justification for an emergency meeting. The economy has not been affected by oil. If it has been hurt by anything it is more likely related to what is happening in the United States,” he said.“We believe oil is reaching its fair level. We maintain that price is $100 per barrel,” said the minister, who has held the post since 2002.Speaking at a news conference at the headquarters of state oil company PDVSA, Ramirez said Venezuela was currently producing its OPEC quota of three million barrels per day, although the most recent official figures put November output at 2.7 million bpd.Intraday, in London, Brent crude futures fell below $100 a barrel as US crude retreated below $90.Members of the Organisation of the Petroleum Exporting Countries will meet with consumers at an energy conference in Riyadh on February 22 and are expected to talk informally about output levels. However, Ramirez said, production decisions could only be made at formal OPEC meetings.

OPEC could raise its output quota if the Suez closed, Iran’s OPEC Governor Mohammad Ali Khatibi was quoted as saying on Friday. Consumer countries would like to see OPEC raise the limits on oil pumped that it imposed on members when prices fell in 2008.Turning to other matters, Ramirez said PDVSA’s 2010 income was $96 billion, up 28 per cent from audited results a year earlier. Consolidated debt was close to $25 billion, he said, up from $21.4 billion the year before.The new numbers are not audited and the final company results for 2010 will not be released until later in the year. In previous years, the audited figures have been different from the preliminary numbers.Ramirez is also president of PDVSA, which is one of the world’s largest oil companies and finances Venezuelan President Hugo Chavez’s drive to build a socialist state. It has suffered from cashflow issues in recent years because of large transfers to central government for social projects.Ramirez said Venezuela had received $800 million in windfall payments from its private partners since November via a mechanism that increases tariffs when oil prices rise above a certain level.

He said Venezuela’s program of certifying new reserves meant the company still had the capacity to borrow more for financing and was in talks with Japanese banks to that end. – n a bid to increase exports in a country where almost-free gasoline encourages high fuel usage, Ramirez said Venezuela aimed to reduce domestic consumption by 100,000 bpd this year.Without giving a date, Ramirez said Venezuela would open a new natural gas auction in the Venezuelan Gulf.He said the Perla field, operated with Italy’s Eni and Spain’s Repsol and Venezuela’s largest to date had proven reserves of 15.6 trillion cubic feet and would start producing gas in 2012 – Dailymailnews