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OPEC holds key to stem falling oil prices: CGES
AFP
LONDON
Petroleumworld.com 09 26 06
Oil prices will probably drift lower in the absence of an OPEC output cut amid fading geopolitical tensions, the Centre for Global Energy Studies said in a monthly report published on Monday.
"As things stand today, further declines in the price are likely unless OPEC somehow manages to reduce its output," the influential research body said.
Crude prices sank below 60 dollars on Monday, hitting their lowest levels since early March as tensions eased over Iran and BP said it would resume output at Prudhoe Bay, the biggest oil field in the United States.
"Oil market fundamentals (of supply and demand) are back in the driving seat now that geopolitical tensions have eased," the CGES said.
Crude prices have tumbled by about 25 percent since reaching record heights above 78 dollars earlier this year, mainly because of forecasts of a slowing US economy, rising US stocks and a mild Atlantic hurricane season.
The report added: "Tension in the Middle East and Nigerian oil supply worries were instrumental in keeping prices on the boil, but peace in the Lebanon and a less confrontational Iran seems to have acted as the catalyst, soothing frayed nerves and opening the door for weak fundamentals to come to the fore."
Prices have also been subdued following a pledge from the 11-nation Organization of Petroleum Exporting Countries to keep its output unchanged.
In September OPEC opted once again to keep an output quota of 28 million barrels per day, where it has remained since June 2005, in a policy designed to keep the market well supplied to cool overheating prices.
In order for OPEC to slash production, a number of factors were required, according to the CGES report.
"First of all, OPEC must have a clear idea of the price it wishes to defend: is it 60 dollars per barrel, 50 dollar per barrel, or a level below that?
"Secondly, OPEC needs to feel a sense of urgency.
"Most importantly, however, some of OPECs members must be ready to share the burden of cuts, otherwise Saudi Arabia will have to go it alone," it added.
The cartel has been pumping at near full capacity in a bid to cool the overheated oil market, but prices are now tumbling, switching attention from the danger of high prices to the risk of an abrupt fall.
AFP 25 1419 GMT 09 06
Copyright ©2006 AFP. All Rights Reserved.
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