Gulf Arab OPEC may tolerate oil below $90

Oil prices may be USD 20 off April's USD 127-a-barrel peak but there is no panic in Riyadh, Kuwait City or Abu Dhabi. Far from it.

Oil policy officials in the capitals of OPEC's Gulf Arab price doves Saudi Arabia, Kuwait and the United Arab Emirates are relaxed and won't be losing sleep if prices fall further.
One senior official in the region told Reuters those producers are unlikely to reduce supplies to try to stem a decline in oil prices unless crude falls below USD 90 a barrel for a sustained period.
Others did not specify an ideal price range but said they would maintain high output and could tolerate a further decline in prices.
Brent crude, trading around USD 107 on Wednesday, has fallen some USD 15 since the start of August as the economic outlook darkened and following the release of strategic consumer reserves and extra supplies from Gulf OPEC producers in June.
The prospect of Libyan oil returning to the market after a first post-war cargo shipped on Tuesday is also beginning to weigh on prices. Libya is hoping to restore full output in 12-15 months.
"The price has come down but it is still above USD 100," said an official from one Gulf Arab OPEC member. "USD 90 is still high," the official said.
The three Gulf producers lifted supply sharply in June after failing to convince the rest of the Organization of the Petroleum Exporting Countries, at a bad-tempered meeting, to back a proposal for a formal increase.
Despite forecasts for a double-dip recession , Gulf Arab supplies remain high and Saudi and its Gulf allies do not appear ready to intervene and prop up prices by withdrawing supplies any time soon.
"I don't see Gulf countries cutting back too much from their production. This will be more of a gradual process and I really don't think Libya will be back in the timeframe that was given," an official from a second Gulf OPEC producer said. "As for the price, it's still high for now."
OPEC's Gulf members are typically the 12-member organisation's most moderate on prices because they do not want high energy costs to restrict economic growth and long-term demand for their main source of export revenue.
Others like Iran, Venezuela and Algeria, who opposed the call for more oil from OPEC in June, have lesser oil reserves and bigger populations and prefer to keep prices as high as possible. Saudi finances flush
The fall in price towards USD 100 a barrel has raised speculation in oil markets about what price level might cause Saudi Arabia to step in to protect its revenues.
Many oil analysts have said that Riyadh now needs a higher price to balance its budget and pay for the extra social spending by the Saudi government to insulate its population from the Arab Spring.
Saudi finances, though, remain strong. Riyadh is on course to earn nearly USD 300 billion in oil revenue this year, USD 50 billion more than planned and has USD 550 billion in foreign reserves, former Saudi intelligence chief Prince Turki al-Faisal said in a speech on Tuesday.
"They're sitting pretty at the moment." said oil consultant Bill Farren-Price of Petroleum Policy Intelligence of the Gulf Arab group. "Anything above USD 90 is fine. They want to support the economy and they appear to have no appetite for re-engaging with the rest of OPEC until December."
"Given the Kingdom's interests in satisfying fiscal requirements and maximizing over time the revenues from its massive oil reserves, we think a price range of between USD 70 and USD 90 per barrel is currently a 'sweet spot' for Saudi Arabia," said Jadwa Investment, a company founded by Saudi royalty, in a report on Saudi finances.
Demand, driven by economic growth or lack of it, will determine the pace at which Saudi, the UAE and Kuwait dial back supplies.
"We are looking closely at demand figures and this is what will determine how much and when to cut," said the second Gulf official. OPEC output at 30 million bpd, 3-yr high
Oil output from OPEC hit a 3-year high in August above 30 million bpd, a Reuters survey found.
It indicated no sign of Saudi or its Gulf allies cutting back the output they provided to offset missing Libyan oil.
Having provided extra barrels without a formal OPEC decision in June, they may choose to reduce their output quietly through the monthly sales process if demand weakens.
Although concern about the U.S. economy and Europe's sovereign debt problems have weighed on oil prices, demand remains robust in faster-growing regions such as Asia and the Middle East.
"If you look at the non-OECD, yes it is slower than last year but it is still strong," another OPEC member country official said.
OPEC's next scheduled meeting to set formal policy is in December and, delegates say, it is highly unlikely to gather before then.