The Organisation of the Petroleum Exporting Countries (OPEC)yesterday suspended its official oil price band, signalling a structural rise in long-term crude prices founded on stronger Asian demand, the weaker dollar and a dearth of substantial new non-Opec supplies.
The removal of OPEC's nominal $22-$28 (€16-€21) a barrel price band underlines the cartel's confidence that crude prices are set for a period of prolonged strength.
However, it will not surprise the markets given that OPEC's basket of crudes has traded above this range for almost 14 months.
The suspension nevertheless marks a significant shift by Saudi Arabia, OPEC's biggest producer which has previously been reluctant to support sustained higher prices for fear of upsetting the US, its biggest oil customer and political ally.
But energy analysts say the US-Saudi relationship has been strained since September 11th, 2001, while the kingdom also needs higher oil revenues to finance its growing domestic spending needs. Sheikh Ahmad al-Fahd al-Sabah, oil minister for Kuwait and Opec president, said the cartel may decide to set a new price range at its next meeting in Iran on March 16th.
Kuwait, a close ally of Saudi Arabia, indicated the revised band could be in the range of $32 to $35 a barrel. - (Financial Times Service)
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)