The price of oil had been going too high, to $120 a barrel, which is not good for consumers because it can affect the world economy, and a price in the range of $90 to $100 will be ideal, said an Opec delegate.

Oil's sharp slide this week is welcome because high prices may hurt the world economy and in the longer term accelerate the use of alternative fuels, the delegate was quoted as saying in our sister publication, the Gulf daily News.

Oil fell below $109 a barrel yesterday (May 6), extending a record rout in the previous session, which wiped as much as 10 per cent from the price, on concern about the strength of global economic recovery.

Oil's drop was prompted in part by the death of Al Qaeda leader Osama bin Laden, the delegate said, rather than any fundamental change in supply and demand for oil.

Another Opec delegate made similar remarks. "High prices will affect demand and encourage the trend towards renewables," he said. "The price is more affected by geopolitics. It was not fundamentals."

Despite the loss of Libyan supply and rising prices, Opec has maintained there is no shortage of crude and no need for any increase in the group's formal production target.

Opec has not officially changed its oil output policy in more than two years. It meets on June 8 in Vienna and is likely to keep output policy unchanged.

"I do not think we're prepared to change the quota at the moment due to the geopolitical uncertainty. Libya's production has dropped dramatically, but there has been a compensation by Saudi Arabia and other members," a delegate said.

Even so, other delegates see the need for a clear signal in June that the group is prepared to take action to bring oil back below $100 a barrel.

Meanwhile, Goldman Sachs, which in April predicted major correction in oil prices, said yesterday that oil could surpass its recent highs by 2012 as global oil supplies continue to tighten.

The Wall Street bank, seen as one of the most influential in commodities business, said it did not rule out a further limited short-term fall in oil prices if macro-economic data, which it said had sparked this week's crash, continued to disappoint.

"It is important to emphasize that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year," Goldman Sachs analysts said.

Other major commodity players among banks, Barclays Capital and Deutsche Bank, said the current levels might be a good buying opportunity.

"While further downside from potential weaker macro releases cannot be ruled out, the general trend from here should be higher, rather than lower, in our view," said Amrita Sen, an oil analyst at Barclays.

Deutsche Bank said: "We believe composure will return to commodity markets as underlying fundamentals remain bullish in our view."

Andrew Moorfield, the head of oil division at Lloyds, said he saw oil at around $110 in 2011 and $100-$110 going forward. – TradeArabia News Service