IPE Brent remains firm on Iran issue; OPEC likely to rollover

London (Platts)--31Jan2006

Crude oil prices hovered close to the overnight settles with traders
waiting for the outcome of the OPEC meeting as, most signals appeared to point
to a rollover in current production levels by the oil producers's group. 
     "OPEC is certainly not going to cut," one broker at Man Financial said. 
     By 1008 GMT, the front-month March IPE Brent futures contract was trading
11cts higher from the overnight settlement at $66.88/bbl having been as high
as $66.94/bbl.
     Prices were expected to drift lower through the day on confirmation of
the decision from OPEC. 
     "The market went into OPEC on the long side and will now want to come out
on the short side," Man Financial told Platts Tuesday ahead of the decision.
Brokers expected the market to make a small cut at the next meeting, likely in
March, to avoid the typical slump in demand.     
     The market still appeared to be concerned about the Iranian nuclear
situation. 
     Iranian oil minsters in Vienna at the OPEC meeting tried to calm the
market early Tuesday by announcing that they would not stop oil exports even
if they were referred to the UN Security Council. 
     "Informing the Security Council or referring the Iranian case to it will
bring an end to diplomacy and that is not at all positive," an Iranian
national security adviser said.
     "What Iran says and what they do may be different," Frederic Lasserre,
Head of Commodities research at Societe Generale said. "It all depends on any
severity of sanctions." 
     OPEC is faced with the tricky decision about what to do about output in
the second quarter when oil demand typically falls. 
     Societe Generale estimates that if OPEC does reign in production to curb
any fall in demand, the surplus could be as much as 2.5-mil b/d. Societe
Generale point out that a similar situation happened last year yet prices
still rallied to all-time highs in August and September. 
     "The problem for OPEC is that it will be difficult to justify a cut in
production with prices at current levels," Lasserre said.     
     Nigeria's oil minister Edmund Daukoru said that he expected a resumption
to all lost Niger Delta crude oil output by mid February. Shell restarted its
115,000 b/d EA field in the country Monday, but insisted that force majeure
remained in place on deliveries from its EA and Forcados fields. Four Shell
workers were released Monday after being held for 19 days.
--Paul Wightman, paul_wightman@platts.com

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