OPEC ministers set their sights on oil at $75-$80 on the eve of policy talks in Vienna, but were expected to hold output steady and rely instead on economic recovery to drive the market higher.
Saudi Arabian Oil Minister Ali al-Naimi said on Wednesday the world was ready to cope with oil at $75-$80 a barrel, the price range the kingdom considers high enough to sustain energy investment for the long term. He said it could be achieved before the end of this year.
Previously, Saudi Arabia signalled it could live with oil around $50 to help nurse the economy back to health.
Oil has already climbed from a low of $32.40 last December to six-month highs above $63 a barrel on Wednesday.
"The price rise is a function of optimism better things are coming in the future," Naimi told reporters.
"We see offshoots of recovery," he added. "There are a lot of positives in what I say because I am seeing a recovery."
Naimi said Thursday's meeting of the Organization of the Petroleum Exporting Countries did not need to change the group's output policy, but he stopped short of saying there was already a consensus among the group's 12 members.
Saudi Arabia has always been regarded as a moderate. Venezuela, by contrast, which has big social spending plans to finance, has typically been among the first to demand higher prices.
On arriving in Vienna on Wednesday, Venezuelan Oil Minister Rafael Ramirez said he hoped oil would reach $75 in the fourth quarter, but said he was concerned about levels of inventory.
He did not expect OPEC to change its supply targets at Thursday's meeting, but said it should focus on improving compliance with existing curbs.
CONVALESCENCE
Delegates said others in OPEC were also concerned about high levels of stocks, but were still hopeful of a price recovery.
"The oil price has been convalescing for the past few months and now it is looking better. I'm sure it will arrive at the levels aimed-for soon," one told Reuters.
When OPEC last met in March, oil was below $50.
Citing the need to restore the economy, which in turn would boost oil demand, the group then called only for tighter adherence to existing output curbs, rather than making new ones.
Since September last year, OPEC has lowered output by 4.2 million barrels per day (bpd) and has implemented around 80 percent of the promised cuts.
The historically high compliance has helped to drive the oil price rally, which has also been sustained by expectations across financial markets that the worst is over economically.
Some analysts have said there is a lack of hard evidence behind the market rises and that strength could be temporary, while others said Naimi's view was probably accurate.
"I think Naimi's comments are very significant indeed," said Mike Wittner of Societe Generale.
"Nobody on the planet sells more crude to more refineries than Saudi Aramco. So when Ali al-Naimi says that he is seeing demand picking up in Asia, Latin America, and the Middle East, you have to believe him because he has the facts."
Provided energy demand indeed recovers, Naimi said oil inventories would shrink back to the equivalent of 52-54 days of forward cover, a measure closely monitored by OPEC.
The International Energy Agency, which represents consumer countries, said in a report this month oil inventories in developed countries had risen to the equivalent of 62.4 days of forward cover, the most since 1993.
It has taken a very bearish view of demand for this year — predicting a drop in fuel consumption of 2.56 million bpd compared with last year — deeper than the fall of 1.57 million bpd forecast by OPEC's economists in their latest report.
But the IEA has also argued that because cheaper oil has stymied investment any demand recovery could drive prices back to the record levels of nearly $150 hit last July.
Naimi too has said that is a risk and the challenge was to keep prices in a stable range, fair to producers, but that does not destroy demand.
"That is the biggest challenge," he said when asked how to contain any price rise. "It's very difficult. There are too many players in the market. It's impossible with so many players."
