President Chavez says current international oil prices “fair and just” at $28 barrel

by The Associated Press

Casting doubt on an immediate OPEC output hike that could reduce international fuel prices, Venezuelan President Hugo Chavez said June 12 that current world market oil prices are “fair and just.”

“We should maintain prices around this level of $28 a barrel,” Chavez told reporters in the Venezuelan capital of Caracas.

The comment calls into question Venezuela’s commitment to raising oil production following the breaching of the upper limit of an oil price band that was approved by OPEC last March.

Ali Rodriguez, who is the current president of the Organization of Petroleum Exporting Countries as well as Venezuela’s oil minister, has been the principal force behind the band concept.

Rodriguez said June 9 that “for now, it looks like we’re not going to have an increase in production before June 21,” when OPEC oil ministers will meet in Vienna, Austria.

Markets have been watching for signs OPEC will increase its output since last June 7, when the 20-day average price of OPEC’s basket of crudes breached the upper end of the group’s self-imposed price band.

OPEC agreed informally in March to raise or reduce output by 500,000 barrels a day if the 20-day average price of the OPEC basket of crudes moved out of a range of $22 to $28 a barrel.

But Rodriguez failed to order the output hike, once billed as automatic, saying the rise isn’t “instantaneous.” Questions about consensus in the cartel for such an increase have now arisen.

After trading around $30 for the last three weeks, crude prices June 12 rocketed to $31.80, their highest levels since prices hit a post-Gulf War high of $34.37 in March.

Front-month July crude futures on the New York Mercantile Exchange closed Monday at $31.74 a barrel, up $1.54.