Opec oil producers kept the heat under strong crude prices on Wednesday as ministers arrived in Japan for a meeting that looks likely to keep stiff output limits in place.
The Organisation of the Petroleum Exporting Countries appears in no mood to make concessions to the industrialised powers that buy its oil, despite concern that high energy costs are stunting global economic recovery.
”Kuwait also says no more oil,” said acting Kuwaiti Oil Minister Sheikh Ahmad al-Fahad al-Sabah, one of many in OPEC who oppose opening up the taps at Thursday’s meeting in Osaka.
”We do not need more crude, but need to safeguard what we have achieved for the fourth quarter,” the minister said.
Leading Opec power Saudi Arabia has yet to reveal its position but is now thought very unlikely to force through a production increase against the will of the majority.
”That would be a big surprise,” said one Opec official here.
”So far I haven’t seen a position in favour of an increase,” said Venezuelan Oil Minister Rafael Ramirez.
Saudi Oil Minister Ali al-Naimi was in talks with Ramirez and other ministers during late afternoon in Osaka.
Pressure on the Middle East-dominated group to lift supplies eased on Tuesday after Iraq said it would permit the return of UN weapons inspectors, knocking some of the war premium out of oil prices.
Washington’s hawkish response to Iraq’s offer helped restore some of the price losses and by 0745 GMT on Wednesday US crude in electronic trade was up 27 cents at $29,35 a barrel.
The $30 danger zone
Even with a smaller war premium, oil analysts are warning that fourth quarter demand growth could prove sufficient to send prices swiftly back above $30 — the danger zone for importing nations according to many economists.
”If Opec doesn’t raise quotas, even with increased leakage there will be stockdraws in the fourth quarter,” said Gary Ross of New York consultancy PIRA Energy. ”Given the worries over Iraq, oil companies will be very reluctant to allow their stocks to draw so that will put upward pressure on prices.”
Opec already is leaking some two million barrels daily above official limits of 21,7-million bpd for 10 member countries.
While the cheating is not good for cartel credibility on sceptical world oil markets, production still has not been high enough for the normal third quarter stockbuild.
Weekly data released on Tuesday by the American Petroleum Institute showed inventories of crude in the United States draining sharply, even before the seasonal jump in demand during the northern hemisphere winter.
The API said crude stocks in the US, the world’s largest importer, fell 6,4-million barrels to
292-million barrels, 12,5-million lower than this time last year.
That doesn’t seem to worry oil ministers.
”Stocks are on the high side I believe right now,” Qatari Oil Minister Abdullah Al-Attiyah told reporters as he arrived in Osaka.
While consumer countries fret that rising energy bills could threaten economic recovery, the flip side of the coin for Opec is that slow growth means less demand for its fuel.
”For Opec the factors weighing are the negative ones,” said Aliro Parra, a former president of Opec.
”They see slow growth in demand, no large reduction yet in inventory, sufficient oil in the market already and a price premium attached to the threat of war in Iraq,” he said in London.
Latest evidence from the International Monetary Fund backs Opec’s cautious view.
IMF First Deputy Managing Director Anne Krueger said in Washington on Tuesday that the global economy was expanding more slowly than previously thought and that there were downside risks to the outlook. – Reuters