Tuesday, December 4, 2007

OPEC unclear over oil output intentions

An oil refinery in southern Iraq
©AFP/File - Essam Al-Sudani

ABU DHABI - OPEC left the oil market on tenterhooks on Tuesday as members of the crude producers' cartel gave mixed signals on the eve of a key ministerial meeting to decide output policy.

Although most member nations of the Organisation of Petroleum Exporting Countries urged the cartel to keep production quotas unchanged, OPEC kingpin Saudi Arabia refused to rule out a possible hike.

"We continue to see OPEC's decision as a close call," Barclays Capital analysts said in London, adding that the odds were tilted towards OPEC maintaining its official daily oil output of 27.25 million barrels.

Saudi Arabia Oil Minister Ali al-Nuaimi insisted Tuesday that "prices are market determined," while refusing to discuss the likelihood of OPEC's output decision.

And Nigeria, Africa's biggest crude producer, also refused to be drawn over Wednesday's decision by the organisation which produces about 40 percent of world oil.

But OPEC members Iran, Libya, Qatar and Venezuela said there was no need to increase production as supplies were adequate while demand for oil was falling.

Meanwhile an OPEC delegate, wishing to remain anonymous, hinted that the cartel may hike daily output by 500,000 barrels of oil, in a "gesture" to the market which holds the cartel responsible for soaring crude prices.

Saudi Arabia, the world's biggest producer of crude, is the only OPEC member with sustainable spare capacity.

The OPEC headquarters in Vienna
©AFP/APA/File - Barbara Gindl

"We don't see any reason to have more oil in the market," Venezuela's minister of energy and petroleum, Rafael Ramirez, told reporters on arrival in the United Arab Emirates' capital.

"We are going to discuss the market situation tomorrow at the meeting to see the different options," he added.

Qatar's Minister of Energy and Industry Abdullah al-Attiyah said there was "nothing that warrants an increase."

With oil prices remaining close to 90 dollars a barrel in trading on Tuesday, one analyst warned that crude futures could hit an historic 100 dollars by the end of 2007 if OPEC decided against raising output in Abu Dhabi.

"OPEC will either roll-over or make a gesture of 500,000 barrels per day" increase on Wednesday, said the OPEC delegate. The increase could be decided despite the market being "more than supplied."

Global Insight analyst Simon Wardell said that any output increase would be a public relations stunt as OPEC was already producing above its official quota.

"Any quota increase would amount to a PR exercise as it would simply bring quotas in line with current production," he said.

OPEC ministers blame geopolitical tensions and market speculation for driving oil prices to record highs above 99 dollars a barrel last month, but many analysts believe supplies are insufficient amid strong demand from China and India.

John Hall, an independent analyst for John Hall Associates, said OPEC needed to increase its daily output immediately by one million barrels to overcome supply shortages.

If it did not, "the (oil) price will go back up to 100 dollars and I think we could see 100 by the end of the year."

Hall added: "Saudi Arabia can increase its output by a million barrels at once."

OPEC last decided to raise production in September when it agreed to provide an extra 500,000 barrels of crude a day to the market, which took effect on November 1.

OPEC comprises Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

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