Unfazed by Oil Price Fall, OPEC Sits Tight for Now (08/01/2007)

Δευ, 8 Ιανουαρίου 2007 - 10:19
Organization of Petroleum Exporting Countries' officials, so far unfazed by this week's sharp decline in global crude oil prices, say they will sit tight to see if the downward trend continues before discussing an emergency meeting or whether they need to deepen existing supply cuts. But the officials say sustained losses are unlikely as persistent geopolitical uncertainties in key OPEC countries and continued demand growth will inevitably push prices back towards the group's unofficial $60.00/bb target. Naturally, OPEC is concerned by this week's 8.5% drop in oil prices, Libya's oil head, Shokri Ghanem said Friday. But he and others within OPEC - which controls one third of global oil supplies - say it is far too early to contemplate an emergency meeting or whether OPEC needs to cut output again. "....we need to see if this trend continues, as it has only been for two days so far," Ghanem told Dow Jones Newswires by telephone from Tripoli. His sentiment is shared by others within the group. "Lets see what happens when the markets open next week. But my gut feeling is that things will calm down as the new year trade settles in," a senior OPEC official said. Iran's governor to OPEC, Hossein Kazempour Ardebili, also says that oil prices will adjust themselves soon. "What we are seeing is probably temporary and a reaction to the weaker dollar and an adjustment in open interest trading at the end of the year," Kazempour said. In the meantime, Kazempour said OPEC is keeping a close eye on the oil market and the group will meet if necessary. But for now, he says the focus is on fund activity, as some funds have been trying to take profits on paper positions on heating oil because of the mild weather. In the past two days, oil futures have lost 8.5% of their value due to unseasonably mild winter in the northern hemispheres' key heating regions and ample oil-product inventories in major markets such as the U.S. and Japan. Friday, oil futures were holding just above $55/bbl. Industry sources say geopolitical tensions, particularly in Iran and Iraq will, however, underpin higher prices in the months ahead. But it was concern that oil prices might fall below $60/bbl which led to OPEC's decision to shave 1.2 million b/d off crude supplies from Nov.1. A further cut of 500,000 b/d effective Feb.1, was agreed when the group met in Nigeria in December. OPEC officials however, say these supply cuts should keep markets balanced until the group meets March. 15. Ahead of that scheduled meeting, several OPEC ministers, including OPEC's de-factor leader Saudi Arabia, will meet in mid-January at an industry event in New Delhi. "Inevitably oil markets will watch that occasion for any indication as to whether OPEC may take action," said an OPEC delegate. OPEC's key Gulf producing members, currently celebrating an Islamic holiday, were unavailable to comment on this week's price moves. Such price developments may however, now test OPEC's resolve when it comes to pumping at its new quotas. This may be particularly important as the group heads into the seasonally lower demand second quarter. A recent survey by Dow Jones Newswires found that production by those OPEC members which have quotas - Iraq isn't part of any quota agreement - crept up by 75,000 b/d to 27.08 million b/d. (Dow Jones Newswires, 05/01/2007)