Opec's big guns keep options open on oil increase
The biggest Persian Gulf producers of the Organisation of the Petroleum Exporting Countries (Opec) are leaving open the option of an oil-supply increase that could influence whether crude prices head back towards $100 a barrel or not.
Oil ministers, gathering to meet on Wednesday, have adopted a coordinated line to insist that supplies are sufficient to meet winter fuel demand and that high prices are driven by factors outside Opec’s control.
But Opec’s core Gulf producers, led by Saudi Arabia, are avoiding comment on whether or not the organisation might still opt for an output increase in a bid to rein in prices now near $90 a barrel.
While oil’s decline from a record $99,29 a barrel two weeks ago to $88,50 on Tuesday appears to have reduced the odds for more Opec oil, leading powers in the cartel have yet to show their hand.
Consumer countries, worried about slowing growth in the United States, want Opec to ease inflated energy costs by raising exports.
So far only price hawks Venezuela and Iran, backed by Libya, have explicitly backed no change in policy with Gulf producers, including Saudi allies the United Arab Emirates and Kuwait, leaving markets guessing.
“Opec can either roll over and speculators will take the price up again before it comes down when reality hits,” said an Opec delegate.
“Or they can increase, a gesture of 500 000 barrels per day, in order to remove Opec’s name for being a reason for increased high oil prices.”
When Opec last met in September it signalled an output increase ahead of the meeting only for prices to rise sharply when it agreed just a modest 500 000 barrel-a-day increment. While Opec routinely blames speculators for high prices and says it has no influence over the market, analysts in Abu Dhabi for this week’s meeting think the cartel is more influential than it likes to pretend.
“The perception of a shortage of supply is driving the market,” said John Hall of John Hall Associates. “If they don’t raise output I think the price could go back up to $100 a barrel and we could see $100 before the end of the year.”
“If Opec doesn’t take action that results in actual barrels being delivered to the market the risk is that prices will resume their uptrend,” said Michael Rothman, head of oil research at US broker-dealer ISI Group.
So far only minor producer Indonesia, marginal in terms of its influence on policy, has said it would back an increase if that would spur a price fall.—Reuters