KUWAIT CITY, April 18, (Agencies): Costly oil could place a major strain on consumer countries with convalescent economies, OPEC ministers said on Monday, in their clearest statements yet they see reduced demand for their crude.
Leading OPEC member Saudi Arabia on Sunday confirmed the kingdom had cut output by more than 800,000 barrels per day (bpd) in March because of weak demand.
Saudi Oil Minister Ali al-Naimi said on Monday the world economy was still fragile.
“The recovery remains patchy, in many countries unemployment remains at unacceptable levels,” Naimi told a meeting of Middle Eastern and Asian energy officials in Kuwait.
Brent crude earlier this month rose above $127 a barrel, its highest level in more than two and a half years.

It has since fallen back to around $122, with Monday’s sell-off attributed in part to Saudi Arabia’s comment on demand.
“At these high price levels, spending on oil imports could represent a significant economic burden for many import dependent countries,” Kuwait’s Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said in a speech at the meeting.
Consuming nations have been the first to argue the oil price is high enough to erode demand for fuel and knock back economic growth.
OPEC ministers have been slower to make a connection between price and demand destruction and some OPEC delegates have cited Japan’s nuclear disaster as one reason for reduced oil consumption.
The shut-down of Japanese nuclear power is expected to lead to higher oil consumption for power generation this year but demand in the world’s third-biggest oil user after the United States and China has fallen.

Japan is importing 4.2 million bpd of oil, a senior government official said on Sunday, roughly 800,000 bpd less than the country consumed in February. Saudi is Japan’s biggest crude supplier.
Saudi Arabia in the past has said $70-$80 a barrel is appropriate for producer nations that need to invest in new supply and yet not too high for consumer countries.
At the Kuwait meeting it has not commented on prices.
Other ministers, however, maintained the view OPEC is not interested in prices so high they destroy consumption.
“One hundred and 20 dollar oil does not interest us in the short term if it undermines long-term economic growth and leads to a collapse in demand and prices in future years,” UAE Energy Minister Mohammed bin Dhaen al Hamli said in a speech on Monday.
OPEC ministers have repeatedly said, however, there is little they can do to lower prices given that the market already has ample supply.

Policy
The Organization of the Petroleum Exporting Countries does not meet formally to reconsider its output policy until June.
The group has blamed this year’s oil price rally on speculation about the possible spread of supply disruption across the Middle East and North Africa after violence in Libya disrupted the bulk of its production of around 1.6 million bpd.
Calling on consumer nations to counter speculative activity, OPEC Secretary General Abdullah Al-Badri said speculators had added a $15 to $20 risk premium to the price of crude.
Saudi Arabia, which has said it has spare capacity of more than 3.5 million bpd, increased its output in February to make up for the lost Libyan barrels, but its substitute crude has found limited interest from buyers.
The bulk of the crude oil produced by OPEC is sour, or high sulphur, while sweet crudes, like Libyan barrels, are highly prized for making transport fuels that meet tight sulphur restrictions.
Iran’s OPEC Governor Mohammad Ali Khatibi told Reuters the market was well-supplied with sour crude. “There is a shortage of sweet crude, the Libyan kind, and as we enter the driving season there is higher demand for sweet crude,” he said.
Meanwhile, representatives from more than 20 Asian and Middle Eastern countries agreed that the world oil market is well supplied and that prices were being excessively pushed higher by geopolitical concerns, according to a final statement released following talks on Monday.
Asian ministers at the biennial Asia-Middle East Energy Roundtable said they were concerned that high oil prices may hamper the global economic recovery.
“There was consensus that geopolitical concerns are overstated since physical markets are well supplied with comfortable levels of spare capacity and stocks,” a statement released at the end of the talks said.

Elevated
“However a concern was voiced by Asian ministers that elevated oil prices ... may hamper the global economic recovery. Producing and consuming countries are committed to do everything they can collectively to limit excessive oil price volatility.”
The next meeting of the group was set for 2013 in South Korea.
For his part, Qatari Minister of Energy and Industry Mohammad Al-Sada, also speaking at the same gathering, described natural gas as the appropriate option for energy uses in industrialized nations owing to asset efficiency.
In spite of the entry of unconventional gas sources in the production market, liquefied natural gas is qualified to play a more significant role in the fulfillment of energy needs of many countries, especially in Asia, he said.
He boasted that in view of world economic recovery, Asia was the best in terms of growth by 5.4 percent compared to 1.8 percent in Organization for Economic Cooperation and Development (OECD) member countries.
But, the Qatari minister maintained, robust economic growth poses challenges to Asian governments; mainly in view of the ability to meet growing energy requirements.
To square up to this about-face, oil producing countries ought to save appropriate investments to boost productive energy, he said, noting that higher supply and growing demand should be in tandem.
In conclusion, he reiterated his country’s commitment to providing world energy needs, given that Qatar is now a leading world producer of natural gas; producing 77 million tons per annum.
Gulf oil producers assured consumers of sufficient crude supplies to help stem rises in oil prices fuelled by sweeping unrest in the Middle East and speculations.
“Certainly, Saudi Arabia’s position in the world oil market is based on its commitment to maintaining spare capacity for the sake of price and market stability,” al-Naimi said.

Spare
Naimi told a roundtable meeting for Asian energy ministers that the kingdom had a spare capacity of more than 3.5 million barrels per day which Riyadh can use whenever the need arises.
On Sunday, Naimi said Saudi Arabia was ready to supply crude as demanded by customers, but he had acknowledged that the kingdom’s oil output fell to 8.29 million barrels per day in March from as high as 9.1 million in February.
Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said the situation now is different from 2008, when oil prices shot to an all-time high of 147 dollars a barrel, because of abundant spare capacity.
“The situation in 2011 is quite different from 2008 due to the availability of surplus capacity in crude oil production and refining capacity as well as the high inventories,” Sheikh Ahmad told the meeting.
But he said the “volatility of prices poses a significant dilemma”, attributing the sharp rise in crude prices to a combination of factors.

“The increase in oil prices is due to the loss of large volumes of sweet crude from the market (Libyan oil), expansionary monetary policy, a weak dollar, fear of spread of political unrest to other producers, and the resilient demand in south-east Asia,” the Kuwaiti minister said.
He also said that oil traders are driving prices higher and amplifying price signals, amid rife speculation.
Oil dipped in Asian trade Monday as traders locked in profits after gains last week, but analysts said prices could still go higher.
Also on Monday, OPEC secretary general Abdullah El-Badri too said the oil cartel was “concerned” at the high crude prices amid fears of lower supply, although he added that markets were adequately stocked.
“We see that there is a $15-$20 premium risk at this time,” Badri told reporters in Kuwait.
New York’s main contract, light sweet crude for delivery in May fell 78 cents to $108.88 a barrel in the afternoon, while Brent North Sea crude for June eased 49 cents to $122.96.