COLUMN-Saudi oil price target stretches to $110: Kemp

Fri Jan 11, 2013 5:34am EST
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By John Kemp

LONDON Jan 11 (Reuters) - There has been no official announcement but Saudi Arabia's effective target for oil prices appears to have risen from $100 to $110 per barrel, based on recent changes in the kingdom's production levels.

In theory, the kingdom remains committed to an informal target of $100 for Brent first announced in a CNN interview given by Oil Minister Ali Naimi in January 2012. "Our wish and hope is that we can stabilise this oil price and keep it at a level around $100," Naimi said.

Speaking after a meeting of energy ministers in Riyadh in October, Naimi reiterated the $100 figure. "We would like to see the price moderating. Today Brent is $111, I think, or $112, we would like to see it lower, towards $100," he told reporters.

But Saudi production policy tells a different story. Output was cut to 9.025 million bpd in December, down from 9.49 million bpd in November and 9.72 million in October, and over 10 million bpd earlier in the year.

Production was cut back even though Brent averaged over $109 in November and December, and $111 in October, well above the theoretical target of $100.

The kingdom now appears content to live with prices around $110. It is focused on balancing the physical market to avert a bigger-than-usual build up of stocks in the first half of 2013 rather than attempting to push prices back towards $100.