A sharp rally in oil prices to near-record peaks stalled on Friday (March 4) after OPEC member Nigeria said the cartel may agree later this month to raise output to cool the red-hot market, according to Reuter’s.
U.S. light crude was off 7 cents to $53.50 a barrel, after dropping as low as $52.90. A rally that started at midweek had prices briefly within 50 cents of last October’s $55.67 record.
Nigeria’s presidential advisor on petroleum, Edmund Daukoru, told Reuters that members were eager to prevent high prices from damaging world economic growth and could agree to raise quotas or relax compliance. OPEC will meet in Iran on March 16.
“I can see two potential outcomes: that discipline would be relaxed so everybody could really do close to their available potential, except Saudi Arabia. We may, on the other hand, take a definite increase in production, in quota,” Daukoru said.
Daukoru added that Nigeria continued to favor a U.S. oil price between $45 and $55 per barrel, but that a sustained price above $55 would harm global economic growth.
That comes in sharp contrast to a statement by acting OPEC secretary-general Adnan Shihab-Eldin on Thursday that a supply disruption in already tight markets could push prices as high as $80 over the next two years.
Many OPEC ministers are wary of boosting output ahead of an expected seasonal decline in post-winter demand, fearing that a hefty increase in consumer inventories could weaken prices.
Venezuelan President Hugo Chavez said on Friday that OPEC does not need to increase production when it meets later this month. “We are producing enough. The increase in prices has nothing to do with OPEC,” he said.
Analysts said that despite the calmer market, a fresh bull rally could be around the corner.
“In my opinion we are going to see higher prices than we have seen, but the market is taking a breather,” said John Brady at ABN Amro in New York.
“It raced up there and probably got a little ahead of itself. I would think usually with a kind of reversal like that, on very good volume, it would usually indicate a day or two days of potential weakness,” he added.
Accordingly, high pump prices could hit record levels over the spring and summer as motorists hit the road for the holiday season, the AAA auto group said. Retail pump prices are now only about 13 cents below the all-time record of last May.