OPEC agrees to roll over oil output ceilingBy Tamsin Carlisle, Kate Dourian, Takeo Kumagai, Margaret McQuaile, Jacinta Moran, Richard Swann & Herman Wang in Vienna June 15, 2012 - OPEC agreed as expected at talks in Vienna June 14 to retain its current 30 million b/d crude output ceiling. The next meeting has been scheduled for December 12, but an official statement said the group stood ready to act quickly in response to any threats to oil market stability. The rollover, described by Saudi Arabian oil minister Ali Naimi as "consumer-friendly," came as no surprise, having been lagged by several ministers over the past couple of days. Iranian oil minister Rostam Ghasemi, speaking just before the formal talks, said adherence to the 30 million b/d ceiling could balance the market and restore oil prices to a $100-$120/b range.
NYMEX July crude futures settled $1.29 higher at $83.91/b June 14, receiving a boost from OPEC's decision as well as from equity gains and dollar weakness. ICE July Brent settled 10 cents lower at $97.03/b on the contract's day of expiration. The August Brent contract settled 45 cents higher at $97.17/b. Some ministers expressed concern about the 1.6 million b/d of overproduction estimated by the group's Vienna secretariat, using secondary sources, in May. Algerian oil minister Youcef Yousfi, quoted by official Algerian news agency APS ahead of the meeting, said that "with this overproduction, there is a risk of an uncontrolled fall in prices." OPEC said in its communique that "ongoing challenges to world economic recovery, coupled with the presence of ample supply of crude in the market, [had] led to the marked and steady fall in oil prices over the preceding two months." "The second half of the year could see a further easing in fundamentals, despite seasonally-higher demand," it added. "In light of this, the conference decided that member countries should adhere to the production ceiling of 30 million b/d. In taking this decision, member countries confirmed their readiness to swiftly respond to developments that might place oil market stability in jeopardy," the communique said. OPEC's meeting has been complicated by rivalry between Saudi Arabia and Iran for the post of secretary general, which is due to become vacant at the end of the year when Libyan Abdalla el-Badri ends his second three-year term. Iran has nominated its former oil minister, Gholamhossein Nozari, while Saudi Arabia has nominated its former OPEC governor, Majid Moneef. Iraq and Ecuador have also nominated candidates, former oil minister Thamer Ghadban and current oil minister Wilson Pastor-Morris respectively. The appointment of a secretary general must be unanimously agreed, which has often been a problem in the past. It was not clear whether a bilateral meeting between Ghasemi and his Saudi counterpart, Ali Naimi, on June 13 had achieved any progress on the issue, which will come up for discussion again at the December meeting. Analysts at Washington-based PFC Energy said the OPEC decision left short-term decisions firmly in the hands of the group's biggest producer in the event of oil prices falling further. "Saudi Arabia will drive reduced output decisions in the near term if prices weaken to under $90/b Brent for an extended period of time. But the defense of even this price level may not be as robust as before -- increasing the chances the market may soon test it," PFC said in a note. "The potential of the market getting away from [Saudi Arabia] in the short-term is now higher, despite their increased efforts and role in the market since Libyan production came off in early 2011—which provides them greater scope to implement a sizeable cut unilaterally," they said. JP Morgan also thought the likely outcome of the meeting was that "Saudi Arabia will continue to control the swing supply from the producer group." "The seasonal upturn in demand in Q3 2012 is expected to tighten our oil balances, and Saudi Arabia's management of inventories, held both domestically and abroad will help dictate the volume of oil available to the market," the bank's analysts said in a note. Barclays, in a report issued before the OPEC meeting began, said it reckoned that "Saudi Arabia has its numbers roughly correct in terms of what it takes to stabilize prices close to $100 given current fundamentals."
To subscribe or visit go to: http://www.platts.com |