LONDON, 7 December 2004 — Oil prices rebounded yesterday on concerns that OPEC producers might announce a surprise cut in output quotas when they meet later this week, following a recent market sell-off, analysts said.
The price of New York-traded light sweet crude for delivery in January was 63 cents higher at $43.17 at about 1700 GMT.
In London the price of Brent North Sea crude oil for January delivery gained 52 cents to $39.88 a barrel.
Last week markets took the view that the Organization of Petroleum Exporting Countries would leave output quotas unchanged for the first quarter of 2005 at their meeting in Cairo on Friday.
But traders were beginning to price in the possibility of a move by the 11-member organization to rein in production following signs of concern among ministers about the extent of recent price falls.
“Obviously OPEC producing so much oil has acted as a good dampener in the market, at least in the last week,” said Veronica Smart, an analyst at the Energy Information Center, a British-based consultancy firm.
“So the news that they might actually slow down production might have slightly upset the market,” she added.
Prices plummeted by more than $6 a barrel last week as fears of a supply shortage during the northern winter faded.
Kuwait called on fellow OPEC members Saturday to stop exceeding their production quotas in light of the price falls. “We are obviously concerned by the drop in prices,” Oil Minister Sheikh Ahmed Fahd Al-Sabah told the reporters in Kuwait City. “We should take the matter very seriously. If this decline continues as it has in the past 48 hours, (OPEC) should stop all overproduction.”
OPEC’s official output ceiling of 27 million barrels per day, excluding Iraq. But the organization’s actual daily output, including Iraq, is estimated to be closer to 30 million barrels. Iranian Oil Minister Bijan Namdar Zanghaneh said OPEC was likely to stick with its current production quota and price band at Friday’s meeting.
There has been speculation that the 11-member grouping might raise its current target price band of $22-$28 a barrel to reflect higher prices. “We feel that there is no consensus to make a change in the price band at the moment. I don’t think this consensus will be reached at the next meeting,” Zanghaneh told reporters in Tehran.
“There is a discussion that we consider keeping the current quota,” added Zanghaneh, whose country is OPEC’s number-two exporter.
However he did say Iran would like to see a cut of around one million barrels per day, “because we think there is a pressure on the price and we have a downward trend in prices.”