Oil Drops After Saudi Oil Minister Says Prices Are Too High

The price of oil fell nearly 3 percent to about $103 per barrel Thursday after Saudi Arabia's oil minister said prices are too high.

In an opinion essay for the Financial Times, published Wednesday, Ali al-Naimi wrote: High international oil prices are bad news. Bad for Europe, bad for the U.S., bad for emerging economies and bad for the world's poorest nations.

Saudi Arabia, the world's No. 1 oil producer, had output of 10.5 million barrels per day in 2010, according to the U.S. Energy Information Administration.

Naimi, 67, an oil industry veteran who has been minister since 1995, said Saudi Arabia wants to see lower oil prices that are fair and reasonable.

We want to correct the myth that there is, or could be, a shortage, he wrote, noting fears of a global oil shortage. It is an irrational fear, a fear without basis.

No Oil Shortage

Production can be increased from current levels, if needed, Naimi said, to his country's current capacity of 12.5 million barrels per day.

Keeping oil prices high, he said, is the market's belief in a potential oil shortage. In reality, there is enough oil in stock to supply the world with crude for 57 days, Naimi said.

His comments come as world leaders in France, the United States, Britain and Japan are considering a release of some of their strategic oil reserves -- billions of barrels -- into the market to help push prices down.

Capital Daily, a market researcher, predicted Thursday that oil prices will remain high in the short term.

Its report said that over time, the price of crude will start to drop unless relations with Iran worsen drastically. Prices will decline further because of Chinese demand and a surge in the dollar as the U.S. economic recovery gains steam, Capital Daily added.

The report forecast London-traded Brent crude to finish the year at $95 a barrel but fall back to $85 a barrel by 2014. The price of Brent closed down $1.88 to $122.28 per barrel Thursday.

Crude for May delivery was trading at $102.86 per barrel Thursday on the New York Mercantile Exchange, down $2.55 from Wednesday's close.