OPEC retains 27.253 million b/d oil production target December 5, 2007 - OPEC ministers meeting in the UAE capital Abu Dhabi agreed December 5, as expected, to leave crude production unchanged for the time being and to meet again February 1 in Vienna. Ministers had been signaling for some time their view that oil markets were amply supplied and that there was no need for OPEC to increase production, although the rise in US light crude futures prices to $99.29/barrel November 21 had spurred louder calls from consumers for more oil. NYMEX front-month crude traded over $1/barrel higher in reaction to OPEC's decision to leave its crude output unchanged, but later reversed course and ended the day 83 cents lower at 87.49/barrel. A communique issued after the meeting ended confirmed that ministers agreed to maintain current output limits set at 27.253 million b/d for the 10 members bound by crude output agreements. The communique also said Angola and Ecuador would be assigned output limits of 1.9 million b/d and 520,000 b/d respectively. Some media reports in the week ending Nov 31 suggested OPEC was considering increasing production by as much as 750,000 b/d. But Hasan Qabazard, OPEC's director of research, insisted there had been no proposal for an increase. "There was no proposal for an increase, everybody agreed with the numbers and the decision didn't take long at all," Qabazard said. "There was no discussion of an increase whatsoever," he added. "This is what the press was saying." The communique said ministers had observed that "market fundamentals have essentially remained unchanged, with the market continuing to be well supplied and commercial crude/product stocks remaining at comfortable levels in terms of days of forward cover." It also noted that international oil prices remained volatile, "in major part due to the perception of market tightness by market players." This perception had been exacerbated "by non-fundamental factors, including the heavy influx of financial funds into commodities and speculative activity in the markets, while geopolitical developments have contributed to price volatility," the communique said. "Given the need for extreme vigilance in assessing the market during the coming months," ministers had agreed to meet again in Vienna February 1 next year. The group's secretary-general, Abdalla el- Badri, told a press conference after the meeting that OPEC had no price target in mind. "We have no price target at all," Badri said. "The market at this time is not controlled by fundamentals. Everybody knows this. It is controlled by speculators and speculation. Until this speculation is removed, we will see volatility in the market day after day and month after month." "They've got 52 days of stocks," Badri said. "There is no reason for the price to up to $100/b." The International Energy Agency, energy watchdog for the industrialized world, said there were signs that additional OPEC barrels could be heading for world oil markets in December despite the decision not to alter output. "While the lack of a formal output increase by the OPEC-10 may do little to calm current market anxiety, the IEA recognizes that total OPEC output has been much higher (largely from Iraq and Angola) than implied by the September decision; and there are signs that more OPEC oil may be on its way in December," IEA Executive Director Nobuo Tanaka said in a statement released by the agency. But, Tanaka said, "our concern is that there are uncertainties that surround the sustainability of some of that supply, and winter demand is as variable as the weather. The market is clearly uncomfortable that it has lost some stock cover in recent months and with prices near $90/b it is telling producers it wants to see that flexibility restored." Lawrence Eagles, head of the IEA's oil markets division, said people had been focusing on OPEC's 500,000 b/d output increase which came into effect November 1. "But the reality is that OPEC output has been increasing since August. We've seen a significant output increase between August and October, much of which is admittedly outside the OPEC-10," Eagles told Platts by telephone from Paris, where the agency is headquartered. "But if you take into account the potential for increases from Iraq, the UAE and Angola in December and also in the first quarter, we obviously have the potential for more supply as well," he said. "Nevertheless, the market still would have been happier with an increase to rebuild stocks," Eagles said. Washington-based analysts PFC Energy said OPEC's decision was not a surprise, but risked reinforcing the perception that the cartel has limited spare capacity and is currently unable to exert much influence over soaring oil prices. The group's insistence that high prices are not linked to fundamentals "serves OPEC in the short term," PFC said, but "risks bolstering the view that it lacks the necessary output capacity to respond to rising prices." "The decision to convene again on February 1 is intended by OPEC to reinforce the perception that it is watching things closely and is ready to act if necessary. But it may not be enough to convince the market that the organization's competence and capacity have not been diminished," PFC added in a note. OPEC, it said, "is struggling to bridge the disconnect between fundamentals and prices, and so influence the direction of the latter." "There is real concern about high prices among key OPEC states, which it acknowledged in its final communique and the post-meeting press conference. But at the same time, OPEC is convinced that the market is well stocked, and it is worried about the impact of raising output now given longer-term concerns over the demand picture for next year," PFC said. "The problem for OPEC is that its lack of action in response to high prices is increasingly being interpreted as incompetence and/or impotence by the market."