Washington (Platts)--12Sep2007

OPEC's announcement Tuesday that it would pump another 500,000 b/d of
crude effective November 1 "signals an attempt" by the cartel to "prevent
sharp increases in prices," but is "unlikely to alter" the current tight
market, the US Energy Information Administration said Wednesday. 

     "The market fundamentals, characterized by rising demand for OPEC oil and
fairly low surplus capacity, should keep markets firm even with the planned
increase in OPEC production, leaving the market vulnerable to supply
disruptions," EIA commented in its This Week in Petroleum report.

     The agency, the statistical arm of the US Department of Energy, noted
that the initial reaction to OPEC output-increase announcement was NYMEX
front-month crude futures closing at $78.23/barrel, up 74 cents from Monday's
level and surpassing the previous all-time high settlement of $78.21/b. The
NYMEX contract Wednesday rose briefly above $79.80/b.

     EIA said it expects OPEC to continue to gradually add supply to the
market in an attempt to avoid a sharp price rise.

     It said it would continue to closely monitor the market, and added that
Saudi Arabia's production decisions would be a harbinger for the overall crude
market. "With the bulk of the world's surplus capacity, Saudi Arabian
production decisions will be a key indicator of market direction," EIA said.
"If demand continues to grow and OPEC raises output moderately, the resultant
reduction in surplus capacity should keep markets tight."

     EIA noted that there is the potential that a downturn in economic
activity could cause a "significant and sustained" drop in oil prices, and
reduce pressure on oil prices. "While this cannot be ruled out, it is hardly
an attractive prospect," the agency said.

     The agency also forecasted its expectations for OPEC production for
September, projecting that total OPEC output would average 30.684 million b/d
and OPEC-10 output (excluding Iraq and Angola, which are not subject to the
cartel's quota system) would average 26.935 million b/d.

     EIA said it sees total OPEC spare capacity for September at 1.97-2.47
million b/d, with the bulk of that -- 1.8-2.3 million b/d -- being held by
Saudi Arabia.

		--Cathy Landry, cathy_landry@platts.com