Oil above $100/bbl was ‘abnormal,’ OPEC’s new chief says

VIENNA, Austria (Bloomberg) -- Oil’s climb above $100/bbl before prices crashed in 2014 was driven by “abnormal” conditions that couldn’t last, according to OPEC’s new Secretary-General.

 

The “skyrocketing of prices” that pushed crude as high as $147 in 2008 was “unsustainable” and probably harmful to the global economy, Mohammed Barkindo said in the group’s monthly Bulletin. The Organization of Petroleum Exporting Countries will continue to work with other oil producers and consumers to find the commodity’s “elusive fair price,” he said.

 

Oil surged above $100 as climbing demand, political risks to supply and a weakening dollar lured speculators to bet on ever-rising prices. After slumping in the financial crisis of 2008, prices recovered to trade near $100 until summer 2014, when a glut caused by booming U.S. shale supply sent prices crashing again.

 

A recent rebound in the number of drilling rigs in use in the U.S. is unlikely to “translate into additional volumes” of crude or “negatively impact on prices,” said Barkindo, who assumed the role of Secretary-General on Aug. 1.

 

Oil prices rebounded Wednesday after tumbling into a bear market earlier this week. Citigroup Inc. to Bank of America Merrill Lynch predict the recent slump will be short-lived, while Societe Generale SA said the price correction would be limited due to a better balance between supply and demand.