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OPEC set to hold output steady, focus on discipline
Source: Agencies |
May 28, 2009, Thursday
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OPEC ministers said they expected to hold output steady at a meeting today, as they bet on a strengthened economy to boost oil prices, but they could urge tougher production discipline to drain excess supply.
"Most probably it will be a roll-over. It seems that this is what people want so I'm not going to oppose it," Libya's most senior oil official Shokri Ghanem said just before the meeting on Thursday.
Saudi Arabian Oil Minister Ali al-Naimi said on Wednesday he saw evidence of economic recovery and the world was ready to cope with oil at US$75-US$80 a barrel, the price range the leading oil exporter considers enough to sustain energy investment for the long term.
He said it could be reached before the end of this year, although other ministers said it could take longer than that.
Already oil has reached six-month highs well above US$60 and above the US$50 a barrel Naimi had previously said OPEC could live with while the world returned to economic health.
The United States, the world's biggest economy and biggest energy consumer, has cautioned too high an oil price could be damaging, although U.S. President Barack Obama said on Wednesday his country had "stepped back from the brink".
Obama and Saudi King Abdullah were expected to discuss oil prices at a meeting next week in Riyadh.
When OPEC last met in March, oil was below US$50.
OPEC ministers were then nervous about high levels of inventory and weak demand, but were also mindful of the weakness of the world economy.
They stopped short of an output cut, but said they would meet again in May to reassess the supply-demand balance.
While some ministers are still focused on high inventories, Naimi said he saw signs of improved demand and predicted stocks would shrink.
A measure keenly watched by OPEC is inventories translated into days of forward demand cover.
Naimi predicted inventories could shrink to the equivalent of 52-54 days of forward cover, from current estimates of around 62 days, which the International Energy Agency said was the highest since 1993.
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, analysts have estimated.
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.
More bearish OPEC ministers have argued the oil rally is not based on firm evidence and could lull members of the group into a false sense of security, leading them to relax output discipline.
"Now the prices are going up, people are more likely to increase production and this could have a negative effect on prices, so there will be an emphasis on compliance," a delegate told Reuters.
"Most probably it will be a roll-over. It seems that this is what people want so I'm not going to oppose it," Libya's most senior oil official Shokri Ghanem said just before the meeting on Thursday.
Saudi Arabian Oil Minister Ali al-Naimi said on Wednesday he saw evidence of economic recovery and the world was ready to cope with oil at US$75-US$80 a barrel, the price range the leading oil exporter considers enough to sustain energy investment for the long term.
He said it could be reached before the end of this year, although other ministers said it could take longer than that.
Already oil has reached six-month highs well above US$60 and above the US$50 a barrel Naimi had previously said OPEC could live with while the world returned to economic health.
The United States, the world's biggest economy and biggest energy consumer, has cautioned too high an oil price could be damaging, although U.S. President Barack Obama said on Wednesday his country had "stepped back from the brink".
Obama and Saudi King Abdullah were expected to discuss oil prices at a meeting next week in Riyadh.
When OPEC last met in March, oil was below US$50.
OPEC ministers were then nervous about high levels of inventory and weak demand, but were also mindful of the weakness of the world economy.
They stopped short of an output cut, but said they would meet again in May to reassess the supply-demand balance.
While some ministers are still focused on high inventories, Naimi said he saw signs of improved demand and predicted stocks would shrink.
A measure keenly watched by OPEC is inventories translated into days of forward demand cover.
Naimi predicted inventories could shrink to the equivalent of 52-54 days of forward cover, from current estimates of around 62 days, which the International Energy Agency said was the highest since 1993.
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, analysts have estimated.
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.
More bearish OPEC ministers have argued the oil rally is not based on firm evidence and could lull members of the group into a false sense of security, leading them to relax output discipline.
"Now the prices are going up, people are more likely to increase production and this could have a negative effect on prices, so there will be an emphasis on compliance," a delegate told Reuters.
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