PARIS, 2 December 2003 — The situation in Iraq and the health of global oil demand are likely to be in the limelight at a special ministerial meeting of the Organization of Petroleum Exporting Countries on Thursday in Vienna.
But OPEC is unlikely to change its production ceiling of 24.5 million barrels per day (bpd), which went into effect in November, shortly after its surprise decision to cut in September.
“I believe that continuing with the current production ceiling is the best option for the coming period, especially because ... the hike in prices is temporary and for political and psychological reasons,” Kuwaiti Energy Minister Sheikh Ahmad Fahd Al-Sabah said yesterday.
“Kuwait will not call for an increase in production at this meeting, nor will we ask for a reduction,” Sheikh Ahmad told reporters before leaving for Vienna.
“Undoubtedly prices have been increasing lately, but all studies affirm that the increase is not due to a shortage in crude supplies, but for other reasons,” he added.
Industry analysts likewise foresaw no change in output. “Having surprised us last time with a quota cut, we think that this meeting will be relatively uneventful and we expect no change to quota levels,” said Jeremy Elden of Lehman Brothers in London. But the group finds itself once again facing contradictory demands.
On the one hand it wants to avoid a drop in oil prices due to growing Iraqi production and a seasonal fall in the second quarter. On the other hand OPEC does not want to anger clients with high oil rates, which have recently risen above OPEC’s official upper price limit of $28 per barrel.
In addition, it has to deal with non-OPEC producers such as Russia that have proven to be little cooperative and well with its own internal divisions.
In theory, the organization could cut its quotas as easily as raise them on Thursday, although holding them steady seemed to be the most likely scenario, said Merrill Lynch analyst Michael Rothman.
OPEC itself seems to be leaning in this direction, convinced that the higher prices do not reflect market fundamentals but are rather the result of speculation and geostrategic uncertainties.
“OPEC members seem to produce more than their quotas. That should tell you that the market is well supplied,” said Farouk Ibrahim, head of communications at OPEC headquarters in Vienna.
Iran, the United Arab Emirates and Venezuela have joined Kuwait in opposing a new production cut.
Meanwhile, oil prices gave up some ground yesterday.
The price of reference Brent North Sea crude oil for January delivery was down 53 cents to $27.92 per barrel. New York’s reference light sweet crude January contract lost 58 cents to $29.83.