15-09-04

OPEC decided at its ministerial meeting to increase its oil production ceiling by 1 mm bpd beginning Nov. 1, but the decision will have little real impact on the high oil prices.

The rise is not of real significance. Oil prices on the international market have been soaring since early this year and reached a record high in mid-August. Under the situation, OPEC no longer demands that members abide by its production quota limit and the production capacity in most of the members has already reached or is close to their limit.

Actually, all the OPEC countries, except Iraq, have already exceeded the new output limit to reach 27.3 mm bpd, 300,000 barrels more than the new quota of 27 mm barrels. The new production ceiling will only serve to legitimise the over-production of the cartel members.

Iranian Oil Minister Bijan Namdar Zanganeh said that the quota hike is a signal to the market, not a change in the total output. He expected the signal will produce a "psychological effect" on the market.

In fact, the ministerial meeting provided a space for keeping the oil prices high as it failed to agree on upgrading the price band mechanism due to differences among the OPEC member countries. As a result, OPEC is to hold an extraordinary meeting in Cairo on Dec. 10 to discuss the issue.

The group has been implementing the price band of $ 22 to $ 28 a barrel since 2000 and is expected to adjust the upper end of the range to $ 30 or higher, which means OPEC will give up its four-year price band policy.

With this adjustment, OPEC's oil prices will stand at a high level for a long period of time and the world oil market will also enter an era of high oil prices, which will have a major impact on oil consumer countries and the world economy.

However, oil prices are expected to drop a little while the global market is waiting for OPEC's next action. The world's voracious demand for oil, the extremely thin margin of spare output capacity in the OPEC member countries, the destruction of the oil facilities in Iraq and the crisis in Russia 's oil giant Yukos have led to the high prices.

In mid-August, oil prices were once close to $ 50 per barrel in the international market. And the prices could become higher for fears of supply disruption and market speculation. OPEC President Yusgiantoro Purnomo warned against over-production at the time when prices soared due to political tensions, which pushed the prices up by $ 10 to $ 15 a barrel.

At present, there exists the possibility of a price drop as the tension between oil demand and supply reduces. But such a drop will unlikely be the result of the new quota policy.

Source: Xinhua News Agency