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Falling oil prices focus OPEC ministers' minds
By Adam Plowright
AFP
VIENNA
Petroleumworld.com 09 11 06
OPEC oil ministers gathering in Vienna on Sunday are set to keep the group's production ceiling stable, but concerns about declining prices have emerged during informal discussions ahead of their official meeting on Monday.
The price of a barrel of light sweet crude in New York has dropped over 12 dollars from its record high of 78.40 dollars in mid-July, closing at 66.25 dollars on Friday.
National representatives from the 11-member Organisation of Petroleum Exporting Countries, which provides about a third of global oil supplies, have all but confirmed that they will maintain their ceiling at 28.0 million barrels a day on Monday.
Nevertheless, Nigerian Oil Minister and OPEC President Edmund Daukoru has said he is "very concerned" by the abrupt fall in prices and identified a number of reasons in favour of a review of the production level.
"The market is really well supplied. Stocks have really built up. Spare capacity is also building up. Non-OPEC capacity is growing quite fast. It is a time to really look at it all," he told reporters.
He also said that the geopolitical situation, one of the key reasons given by OPEC for its high output level, has "cooled off somewhat".
The Iran nuclear standoff has been driving prices higher and senior EU and Iranian officials said Sunday that they had made progress in last-ditch talks to avert UN sanctions over Tehran's disputed nuclear program.
A decision by OPEC to maintain its production ceiling, which has been at a near 25-year high since June 2005, would continue a policy of keeping the market well supplied in a bid to cool turbulent prices.
Oil has tripled in value since 2002 on surging global demand, driven by China and other emerging countries, as well as fears about interruptions to production in Iran and outages in Nigeria and Iraq.
Although Daukoru suggested a review of the production level, the case for a change in output would have to persuade kingpin Saudi Arabia, the biggest producer in OPEC.
Saudi Arabian Oil Minister Ali al-Nuaimi arrived on Saturday saying he was "very happy with the situation".
"The demand is very well satisfied. You see the inventories rising. The market is very comfortable and well supplied," he said.
Shukri Ghanem, head of Libya's National Oil Company and the country's representative at the OPEC meeting, echoed this message, reinforcing expectations that the output level will be maintained.
"I don't expect any change in the quota," he said.
In the official decision and statement on Monday, analysts will look closely for any signal of a change in position from the group which might point to possible action at their next meeting in December in Nigeria.
The OPEC quota system excludes production from Iraq but binds the remaining 10 members of OPEC to limits in a bid to stabilise prices and safeguard the oil revenues of the exporters.
In July, the 10-members bound by the OPEC output ceiling produced about 500,000 barrels per day less than the 28.0-million quota, according to figures from OPEC published in August.
Including Iraq, OPEC countries pumped out 29.5 million barrels per day in July.
AFP 10 1754 GMT 09 06
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