Purnomo says OPEC may reset oil price range

Fitri Wulandari, The Jakarta Post, Jakarta

The Organization of Petroleum Exporting Countries (OPEC) is reviewing its current oil price band to adjust to the U.S. dollar depreciation against major currencies and inflation, according to the cartel's top official.

OPEC president Purnomo Yusgiantoro said the price band of US$22 to $28 per barrel was deemed no longer suitable for present conditions as it had been set in 2000.

"We are studying (a new price band)," Purnomo, who is also minister of energy and mineral resource, announced on Tuesday.

Asked if the price band would be changed to between $25 and $32 as suggested by analysts, Purnomo replied it was possible.

Purnomo could not confirm if the result of the study would be available when the oil cartel holds its next meeting in June.

"It depends on how (long) the study takes," he said.

The price band mechanism is aimed at keeping a basket of crude prices within a certain range by increasing production if the price stays above $28 barrel per day for 20 consecutive trading days. If the price stays below $22 per barrel for 10 consecutive trading days, OPEC could cut output.

The OPEC reference basket price is the average price of seven crude oils, namely Saharan Blend (Algeria), Minas (Indonesia), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Dubai (United Arab Emirates), Tia Juana Light (Venezuela) and Isthmus (Mexico).

But OPEC, which produces a third of the world's oil, has decided not to bow to the price band even though oil prices have hovered above the range since Dec. 5. The cartel argued that the soaring oil price was due to nonfundamental factors, mainly speculation by traders.

On Monday, oil prices ended higher as traders reacted nervously to weekend news of attempted attacks on Iraq's main southern oil terminals.

AFP reported New York's reference light sweet crude June contract rose 51 U.S. cents to $36.97 per barrel in late deals.

The price of benchmark Brent North Sea crude oil for June delivery climbed 49 U.S. cents to $33.58 per barrel in London.

Elsewhere, Purnomo said that he planned to visit Russia in September to attend a seminar on oil and gas held by the Indonesian Embassy in Moscow to celebrate its 50th anniversary.

Russia is a not an OPEC member, but has a quite significant oil production of some nine million barrels per day (bpd). Russia plans to lift output to 9.5 million bpd this year.