CAIRO: Arab OPEC ministers began arriving in Cairo Thursday 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. Since oil is priced in dollars, it becomes more affordable to investors with foreign currency like the euro as the dollar falls. The euro veered sharply higher in the early afternoon after falling earlier in the day. In late trading in New York, the euro rose to $1.3114 from $1.3089 late Wednesday. Earlier Thursday, the euro had dropped to $1.3054, its weakest point since Nov. 30. A full conference of the Organization of the Petroleum Exporting Countries earlier this month elected to make no change to an output policy it has stuck to since December 2008. Since then oil has maintained a more than 30 percent rally from this year's low struck in May and this week scaled a high of $90.80, the steepest in two years. 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 Reuters. 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. In Quito earlier this month, OPEC Secretary-General Abdullah Al-Badri said OPEC would base any change in policy on fundamentals of supply and demand, rather than price alone. "If it goes to $100 due to speculation, OPEC will not move," Badri said. OPEC's record output cut of 4.2 million barrels per day agreed in December 2008 leaves plenty of room for informal adjustments. An anticipated increase in oil demand next year is expected to take absolute consumption to a new high, but analysts are still careful to draw a distinction between the current market and the protracted bull run that began at the start of the decade and culminated in the 2008 record. The rate of demand growth next year has been pegged at 1.5 million bpd, only half the 2004 peak, according to data from the International Energy Agency, of 3 million bpd. At the same time, OPEC spare capacity is ample at several million barrels per day, and crude inventories in the world's biggest oil consumer the US are still above year-ago levels, even after a sharp drop reported this week.
