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Kuwait’s finance minister said Tuesday current oil prices are too high and are inflationary, Bloomberg News reported. “I think it’s high,” Finance Minister Mustafa Al-Shimali said in an interview in Isfahan, Iran, today with Bloomberg News. A reasonable oil price would be “more or less $100,” he said.

Oil traded Tuesday at midday down $1.04 to $133.57 per barrel. Oil hit an all-time high of $139.89 per barrel on Monday, June 16, 2008. Oil is up more than 100% in 2008 and more than 400% since 2000. Equally significant, oil’s 200-day moving average — the toughest moving average to break from a technical analysis standpoint — is at $99.77.

“I would like to see these prices go down and in parallel also have the price of goods we import go down,” Kuwait’s al-Shimali told Bloomberg News. Kuwait pumped about 2.6 million barrels of oil per day in May 2008, according to a Middle East Economic Survey estimate.

Oil fanning inflation, globally

Economist David H. Wang said Kuwait, and other oil producing nations who import goods, are beginning to see the downside of extraordinarily high oil prices.

“It’s clear that oil is not only fanning inflation through products that use petroleum and it spin-offs, it’s also forcing other commodity prices higher as an inflation hedge, and it sounds like Kuwait’s finance minister agrees with this analysis,” Wang said. “The fact that we now have Kuwait and Saudi Arabia on record as saying that oil prices are too high is a step in the right direction heading into the June 22 summit.

Saudi Arabia, the world’s largest oil exporter, is expected to increase oil production next month by 500,000 barrels per day, according to analysts and traders who have been briefed by Saudi officials, The New York Times reported Sunday. Saudi Arabian Oil Minister Ali al-Naimi has also said the summit will find a solution to “stabilize” oil prices he argues are “unjustified” by supply / demand fundamentals, Bloomberg News reported.

Wang said if Saudi Arabia follows through with a production increase, it will help cool oil markets by sending a signal to short-term traders that an oil-long position is not a slam-dunk, a riskless calculation.

“For more than a year, an oil futures purchase has practically been a guarantee of a profit,” Wang said. “If oil production increases that will moderate prices, and force some speculators to exit the market. That would make buying oil even riskier, which would further contain prices.”

Sources: Joseph Lazzaro