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Friday, December 24, 2010

AOPEC meets today as oil prices cross $91

CAIRO, Dec 24 : Arab OPEC ministers began arriving in Cairo ahead of talks Saturday to broach how high an oil price the world economy can stand as the market hovers near two-year peaks above $90 a barrel.

Oil prices touched two-year highs Thursday, supported by continued cold weather in Europe and North America and positive US economic indicators. Benchmark crude for February delivery rose $1.03 to settle at $91.51 on the New York Mercantile Exchange.

In London, Brent crude rose 60 cents to settle at $94.25 on the ICE Futures exchange.

A weaker dollar also supported higher oil prices. The Organization of Arab Exporting Countries (OAPEC) brings together the Arab members of OPEC, including Saudi Arabia.

"About $100 would be a fair price for the time being," Libya's most senior oil official Shokri Ghanem told newsmen.Analysts have said the likelihood is the strong price would encourage OPEC to produce more oil, although first of all by informally pumping in excess
of agreed limits rather than through a policy change.

"I think we are going to see more production because oil is above $90," said Patrick Armstrong of London-based Armstrong Investment Managers. "The market could easily go for $100 because we're starting to see more commodities allocation to preserve the real value of investment portfolios, but I don't think we're going to see scenarios for spikes."

Saudi Oil Minister Ali Al-Naimi said at the start of November consumers were looking for prices in a $70-$90 range. He later reiterated a view the Kingdom has held for two years that $70-to-$80 was the best range for producers and consumers, ensuring enough revenue to generate investment in new supply while avoiding the economic damage that could destroy demand. But others in the group have pressed for a higher price, arguing quantitative easing and a weakened US dollar that has spurred gains across financial markets mean the oil price strength
is partly nominal.

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