Analysts are unsure that the histrionics from the podium in Riyadh, including calls for a politically militant rebirth for the oil exporters group from Venezuela's President Hugo Chavez, will have any bearing on the upcoming meeting. But it leaves a stronger spotlight on the meeting of OPEC oil ministers in two weeks in Abu Dhabi, United Arab Emirates, at a time when oil prices are again zooming in on $100 a barrel.
Chavez's view, backed by Iran and returning member Ecuador, was deftly blunted by the host, Saudi Arabia's King Abdullah, and in a compromise, a call for dumping the dollar as the currency of choice for oil trade was shunted off for committee study.
In passing comments, OPEC officials maintained that current stockpiles are sufficient, speculators and refinery bottlenecks are underpinning prices, and crude oil isn't in short supply. Putting the summit aside, the upcoming OPEC minister talks will, as ever, be about how OPEC responds to high prices, when effectively only Saudi Arabia has capacity to significantly boost output.
"Emerging internal power dynamics between OPEC have and have-nots are set to make agreements more contentious for the foreseeable future," said Edward Morse, chief energy economist at Lehman Brothers.
In a report this week, Morse pondered whether Saudi Arabia accepted contentious language eluding to the dump-the-dollar study in the summit communique in return for a commitment to back an output rise.
There's no clear answer yet, but the Lehman report said: "In our view, it appears that Saudi Arabia will push for an output increase at the oil ministers' meeting in December." Long-Term Saudi Price View Morse said there isn't any easy way for OPEC, or indeed, countries like Venezuela, on their own to disassociate themselves from the dollar, which has hit record lows against the euro. While some commodity exporters - including Kuwait, the UAE and other Gulf states - have begun to move some of their reserve holdings away from the dollar, "we expect no change to emerge in Saudi policy in the short term."
Saudi Arabia's foreign minister, in comments that were inadvertently broadcast on closed-circuit television to journalists from inside a closed ministerial session, warned that an OPEC move from the dollar would put increased pressure on the currency.
"The kingdom seems determined to do what it can to reduce the dollar price of crude oil as a matter of policy; it sees prices $20 to $30 per barrel lower than today's prevailing prices in its longer-term interest," Morse wrote.
Nymex crude oil futures prices Tuesday settled at a nominal record high of $98.03 a barrel, jumping $3.39, or 3.6%. That's the closest prices have been to the real cash-market high of $102 a barrel, in October dollars, set in early 1980.
OPEC, just prior to the summit meeting, in its monthly oil report presented a much tighter view of near-term oil demand growth than held by others. First-quarter 2008 oil demand is expected to gain by just 340,000 barrels a day, or 0.4%, from the current quarter, according to OPEC's forecast. The energy watchdog of the major industrialized nations, the International Energy Agency, which supports an OPEC output rise, sees first-quarter demand rising by 1.3%, or 1.1 million barrels a day from current levels.
Harry Tchilinguirian, senior oil market analyst at BNP Paribas Commodity Derivatives in London, said any policy decision on Dec. 5 "only heightens the probability that an eventual increase in supply will come too late to meet peak winter demand." Dollar Impact On Policy Frederic Lasserre, head of commodity research at Societe General in Paris, said in a report that "a weaker dollar means that OPEC is likely to be more aggressive in its pursuit of higher, rather than lower, prices, because it will attempt to offset the reduced purchasing power of its petrodollar revenues."
Lasserre said he sees OPEC keeping a tight hand on the output tap in a continued attempt to keep front-month prices trading at a premium to forward prices, which will limit growth in consumer countries' oil inventories.
Analysts at Goldman Sachs and UBS Securities said they see the recent relationship between weak currency prices and strong oil prices as coincidental, with no long-term historical correlation.
Jan Stuart, economist at UBS Securities in New York, boosted his price estimate for the current quarter by 28% for U.S. crude to $85.50 a barrel amid longer-term rises.
"We think global supplies are increasingly constrained," Stuart said in a report this week. But, he said, he believes that oil prices near $100 a barrel "will not stick" due to "bearish economic and oil demand news."