[Goldfisch]

OPEC Has "Understanding" $28/Bbl Is Price Floor -Source



VIENNA -(Dow Jones)- A senior OPEC source said Monday the group has "an understanding" the bottom end of its preferred price range is $28 a barrel for its reference basket of crude oils, and not $22 a barrel.

The source, speaking to Dow Jones Newswires on condition of anonymity, said there was nothing official in place, yet it was a "loose" agreement that the group move away from a target price of $25 a barrel "plus or minus $3."

The move equates to a 27% rise in the price floor.

The source confirmed what many observers suspect is a private pact to maintain prices at a higher level.

As recently as Sunday, Saudi newspapers had quoted Saudi Arabia's Minister of Petroleum & Mineral Resources, Ali Naimi, reiterating oft-stated OPEC policy that oil at $25 a barrel is fair for consumers and producers.

OPEC's basket of seven crude oils tend to trade some $2-$4 below U.S. benchmark blends.

Also Sunday, another senior source, responding on condition of anonymity, said he didn't expect a meaningful drop in the group's oil output unless the price of OPEC's basket of crude drops from near $32 currently, to near $28.

On paper, OPEC has a mechanism intended to keep its basket price within a $22- $28 a barrel range by raising output by 500,000 barrels a day if the basket price holds above $28/bbl for 20 consecutive trading days, or lowering output by 500,000 b/d if the basket price stays below $22/bbl for 10 consecutive trading days.

Yet it has ignored the mechanism for now, citing the depreciation of the U.S. dollar and what it thinks are unusual world oil market conditions, driven by speculators and not fundamentals.

According to OPEC's news agency, Naimi told local papers; "We in OPEC see that $25 a barrel is a fair price for producers, consumers, and that, in the long term, a price between $22 and $28/bbl should be realized."

Asked whether OPEC will discuss raising its target price to $32/bbl to make up for the drop in the value of the U.S. dollar against other major currencies, Naimi said: "No member has presented such a proposal," adding that "such a proposal won't be discussed unless presented by a member country."

OPEC is gathering in Vienna ahead of policy talks Wednesday intended to gauge whether now is the right time to implement a previous agreement to lower its output ceiling of 24.5 million b/d by 1 million b/d.

-By Sally Jones, Dow Jones Newswires; +44 207 842 9347; sally.jones@ dowjones.com


Dow Jones Newswires
03-29-041305ET