OPEC heads for quota rollover despite concern over prices

Vienna (Platts)--11Sep2006

OPEC is still expected to maintain its current crude production
ceiling at 28 million b/d at talks underway Monday in Vienna, although the
$13/barrel slide in oil prices since early August has prompted some ministers
to talk about the potential need to trim back output.
Iranian oil minister Kazem Vaziri Hamaneh said OPEC would need to cut
output before the end of this year if oil prices continued to fall, but that
he expected the group to maintain the current ceiling at today's talks.
"If the downward trend continues there would be a need [to cut]," he told
reporters. "I don't think there will be a change in the quotas at this
meeting," he said.
"Supply is more than demand, and stocks are at a very high level, and
because of these two factors prices are very fragile," Hamaneh said, adding:
"There is concern that non-OPEC supply will increase substantially next year."
OPEC's Nigerian president Edmund Daukoru has expressed particular concern
about the price slide, saying that OPEC must discuss at Monday's meeting
whether it should in fact opt for a cut in the current ceiling.
"I can't say what the decision will be," Daukoru told reporters just
ahead of the formal conference, adding that ministers would look at
supply/demand fundamentals separately from the so-called fear factor that has
helped drive oil prices higher.
"We will definitely not be producing more," he said. "Whether we cut or
hold the current ceiling is what we have to discuss," he said. "We have been
producing more or less regardless of the call on OPEC and it cannot continue."
Venezuelan oil minister Rafael Ramirez said there was "a consensus of
concern over the behavior of prices."
"We are looking to see if [prices] are adjusting themselves or if it is a
situation that is going to remain in the long run. We don't want the price
fall to [continue] and we will take any action to avoid that happening,"
Ramirez said.
Saudi oil minister Ali Naimi cautioned against placing too much emphasis
on what could be short-term trends and said that what he called current oil
price "blips" were not significant when viewed in the longer term.
"Don't take these blips as significant," he said, asked whether he was
concerned about the price slide that has taken North Sea benchmark Brent from
an all-time high of $78.65/barrel on August 7 to below $65/barrel.
"I hope I have said many times the price is determined by the market,"
Naimi said. "You have to understand the business we are in. We are used to
seeing demand going up and demand going down, prices going up and down, and
investors going in and out. We hopefully make the right decision at that
point. But then the next day, things go differently and then you make another
decision. That's the business we are in. It's a moving market."
A key ministerial panel, of which Daukoru is a member, Sunday agreed to
recommend that current official quotas be maintained, amid strict adherence to
quotas, and that OPEC could if necessary meet again before its next scheduled
conference on December 14 in Nigeria.
Some OPEC ministers and delegates have suggested that any trimming could
be done informally. Qatar's Abdullah al-Attiyah, for example, made the point
earlier Monday that consumers would effectively decide how much oil OPEC
should produce.
"When they don't need this crude in the future...then we will have to cut
because no one will buy it."
OPEC's ten members with crude production quotas--Iraq does not have
one--are already pumping less than the 28 million b/d ceiling, according to
independent estimates. A Platts survey last week pegged OPEC-10 output at
27.91 million b/d in August, up from an estimated 27.63 million b/d in July.
OPEC has not identified a price trigger for a possible future cut, but
Iran's Hamaneh said Monday he did not want to see oil prices falling
below $60/barrel. He did not specify which benchmark he was referring to.
"The favourite price is not below $60/barrel," Hamaneh said. Asked if
this meant he thought OPEC should cut output if prices fell below $60/barrel,
the minister said: "There is not a target as such, but as production costs
have increased, then a price below $60 is not good."
A key driver pushing prices upward in recent months has been the dispute
over Iran's nuclear program, amid fears that Iranian crude exports of some 2.4
million b/d could be disrupted in the event of the dispute escalating.
Monday's price fall has been attributed partly to reported progress in
talks, also in the Austrian capital, between Iran's top nuclear negotiator Ali
Larijani and Europe's foreign policy chief Javier Solana over the weekend.
Both men said the talks had been constructive and that some misunderstandings
had been cleared up on both sides.

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http://www.platts.com/Oil/Resources/News%20Features/opec/index.xml


 

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