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Iran's Oil Minister: OPEC agrees to suspend oil price band

Vienna, Jan 30, IRNA -- Iran's Oil Minister Bijan Namdar Zanganeh announced in Vienna on Sunday that OPEC had agreed to suspend the organization's target price band of dlrs 22-28 per barrel.

"Given that the (actual) oil price is far higher than the dlrs 22-28 range set by the OPEC, the organization's ministers decided that this band is temporarily suspended," he told IRNA reporter here.

Zanganeh said OPEC ministers will decide on a new price target at their next meeting in Iran's central city of Isfahan on March 16.

According to the Iranian oil minister, the Organization of Petroleum Exporting Countries also agreed to hold its current oil production ceiling of 27 million barrels per day steady.

"The OPEC oil ministers also agreed on keeping the current output ceiling steady, meaning the organization will continue to produce 27 million barrels per day, the official ceiling set in Cairo meeting."

Last Monday, Zanganeh stated that global oil supply was more than the demand in the international market and that there was no real shortage in oil output.

"We should wait and see whether the Organization of Petroleum Exporting Countries (OPEC) would reduce its oil production quota by one million b/d during its upcoming 11th meeting in Vienna," he had said.

The minister had noted that political factors were weighing on the oil market, when asked whether recent US threats against Iran were to blame for rise in prices.

"Any threat or ballyhoo can lead to price increases," he said.

George W. Bush was quoted to have said earlier this month that he 'will never take any option off the table' when asked whether his government was willing to consider a military action against Tehran's peaceful nuclear program.

His remarks were echoed by Vice President Dick Cheney who said Israel might strike Iran's nuclear facilities 'without being asked'.

The statements came on the backdrop of a report written by investigative journalist Seymour Hersh in The New Yorker magazine, saying US operatives were scouting inside Iran to identify targets for possible air strikes.

Last Monday, the Center for Global Energy Studies (CGES) upgraded its forecast for oil prices this year to dlrs.42.5 per barrel (dpb), expecting tight market fundamentals that would make it easy for OPEC member to defend a high target price.

"Even if global oil demand growth in 2005 slows to little more than half of last year's rate, OPEC members should be able to achieve an average price of 40 dpb for their oil without needing to cut their output much further than they already have done," it said.

Last month, CGES conservatively predicted that oil prices could fall to an average of 32 dpb this year and even drop as low as 26.6 dpb in the third quarter if OPEC makes no cut in its production ceiling.

But in its latest oil report, it believed that rates would stay above 40 dpb throughout 2005 in its reference case scenario, suggesting that this was close to OPEC's target.

OPEC had adopted the target price band in early 2000 but prices have soared well above that in the last year, reaching a high of 55 dollars a barrel in October.

AFP quoted Kuwaiti Oil Minister Sheikh Ahmad Fahad al-Sabah as saying that a price band of 32-35 dollars would be 'a good price', remarking that the 22-28 dollar range was effectively defunct.

Zanganeh signalled that a new target 'somewhere between dlrs 30-dlrs40' per barrel was appropriate.

According to the CGES forecast, the price for benchmark dated Brent could rise to 47.9 dpb by the third quarter and average 46.2 dpb for the year if demand increased.

Whereas with more non-OPEC supplies, it suggested the average rate for 2005 could be 39.7 dpb, still higher than 2004's average of 38.5 dpb.

"In the short term there seems to be little to undermine the current strength of oil prices, unless there is a sudden and dramatic collapse in oil demand growth, which seems unlikely," the London-based center said.

It said that it would take the fullness of time for the impact of high oil prices on demand to begin to show, but said it will take a 'much more dramatic slowdown than we expect in 2005 for it to have a big impact on oil prices'.

... Payvand News - 1/30/05 ... --

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