Oil demand is picking up, Saudi Oil Minister Ali al-Naimi said on Tuesday, which could mean OPEC does not have to take any action on supply this year.
We have been sailing very well and we will continue to sail very well, Naimi, minister for the world's top oil producer, told reporters a day ahead of a meeting of the group, many of whose members have voiced concern it is pumping too much oil.
OPEC agreed members would slash 4.2 million barrels per day (bpd) from output to curb supply at 24.84 million bpd in December 2008 as the chill of recession threatened to shrivel oil demand.
In the past year, rising prices and a hesitant global recovery have encouraged revenue-hungry OPEC members to add supply. In February, OPEC delivered just 53 percent of the pledged output curbs -- down from 81 percent a year ago.
Nevertheless, oil prices have not strayed far from levels Saudi Arabia considers beneficial to producers and consumers, around $70-80 per barrel, as investors eye a future pick-up in demand to mop up current oversupplies.
On Tuesday, Algerian Energy and Mines Minister Chakib Khelil said prices will edge up into the $80-85 range by year end.
Benchmark U.S. crude futures steadied just shy of $80 per barrel on Tuesday, after a fall of nearly 2 percent on Monday triggered by dollar gains and worries that China might tighten credit further to put a brake on inflation.
SHORT TERM TOUGH, MORE RELAXED IN LONG TERM?
Caution over the short term outlook remains, however.
Royal Dutch Shell
Several ministers arriving in Vienna stressed the need to adhere to output targets as global demand heads into the traditionally weak second quarter.
Kuwait's oil minister Sheikh Ahmad al-Abdullah al-Sabah on Tuesday became the latest to say compliance was the major issue.
But Naimi was more relaxed about overproduction, taking the longer view shared by major forecasters that bustling China will drive even stronger global economic recovery later this year.
The reason why the global economy is going to grow faster is because China and India are pulling very hard, OECD secretary general Angel Gurria said as he forecast global growth this year of 4 to 4.5 percent.
The International Monetary Fund (IMF) expects China's economy to expand 10 percent this year while advanced economies will deliver a faltering 2.1 percent.
Naimi said OPEC would not reduce supply if it meant prices could be driven too high.
The market is happy, there is balance, there are no shortages, there is enough investment going on, he said.
(additional reporting by Alejandro Barbajosa, Amena Bakr, Joe Brock and Sylvia Westhallin Vienna and Eman Goma in Kuwait; editing by William Hardy)