London (Platts)--27Jan2009

OPEC appears to have cut enough crude production to stabilize oil prices
around $45/barrel, despite not having managed to reduce output to official
limits, the London-based Centre for Global Energy Studies said Tuesday.

But the CGES warned that if OPEC tried to push prices higher, the result
could be a deepening of the world economic turmoil and a further undermining
of world oil demand.

"The action taken so far appears to have been sufficient to bring a
fragile stability to oil prices at around $45/b for Brent," the CGES said.

It added, however, that this price level was "too low for comfort" for
many OPEC members which, it said, had quickly become accustomed to the high
revenues they enjoyed last year.

"OPEC members will struggle with oil prices at this level and will seek
to push them higher," the CGES said. "The pursuit of higher oil prices risks
deepening and prolonging the global economic crisis and further undermining
oil demand."

The CGES said OPEC kingpin Saudi Arabia could cope with lower oil prices
and that the $75/b target mentioned by King Abdullah late last year could
reflect the level needed by other OPEC members which had not amassed the
"huge" cash reserves enjoyed by Riyadh.

"Although the Iranian budget for the coming year, which begins in March,
assumes an oil price of $37.50/b, for example, such a level would cause real
economic difficulties for the country and political ones for its president,
who faces an election in June," it said.

Nevertheless, it added, "almost all of the messages coming out of OPEC
member countries suggest that further production cuts will be made in the
coming weeks, as they seek to adjust production closer to their agreed quota
levels."

The CGES said Saudi Arabia in particular seemed committed to seeking
higher prices, having indicated that it would cut output below its quota level
if necessary and having slashed February discounts for its export grades.

But while warning that the pursuit of higher prices could damage the
global economy, the CGES said world economic weakness could thwart the
cartel's efforts to push prices back up to $75/b and keep them there.

The CGES estimates December production from the 11 members bound by
output targets--Iraq is not among them--at 27.552 million b/d. This is 2.7
million b/d more than the 24.845 million b/d target which came into effect at
the beginning of January.

The CGES, which expects world oil demand to fall by 700,000 b/d this
year, expects Brent to average $43/b in the first quarter and $44/b over the
course of the year.

Front-month Brent crude futures were trading at $46.51/b at 1410 GMT
Tuesday.