Stage is set for a highly politicized gathering.
In fact just a few days ago, a mail came from a knowledgeable friend asking if I was planning to be in Vienna for the ministerial meeting ± to witness ‘the OPEC magic?’ That explains it all.
A number of burning issues are on the table.
Of all, the Libyan quagmire awaits a decision.
With both Muammar Qaddafi and Benghazi-based transitional government aspiring to represent the war-torn country at the event, OPEC is faced with a real dilemma.
As of late Friday, it was still unclear who would represent Libya. And making the decision would definitely not be an easy one - for it would have political connotations too.
With Shokri Ghanem — the energy face of Libya switching sides by defecting to rebels — has added to the pressure on OPEC.
A former prime minister, Shokri Ghanem, until recently, was heading Libya’s National Oil Corporation.
Opinion within the OPEC is definitely divided.
With Qatar taking a lead, by openly siding with the rebels, it would definitely not be comfortable in sitting next to a Qaddafi representative. It would be an odd couple - to say the least.
But with the EU and especially Austria not yet extending formal recognition to the rebels yet, inviting them to take the hot seat within the OPEC would not be diplomatically convenient - to say the least.
And in the meantime, there would be behind-the-scene pressures on OPEC too — one could definitely deduce.
Eyes would also remain focused on Iran.
It isn’t very apparent yet, who will represent Tehran at crucial OPEC talks.
This is still more significant because Iran has the rotating presidency of the group since beginning this year.
The earlier indication that Iranian President Mahmoud Ahmadinejad may himself be present at the event made many in the West uneasy.
Iran has been without an oil minister since May 14 when the President sacked oil minister Massoud Mir-Kazzemi and took charge of the ministry as a caretaker.
Indications, however, are now emerging that the just-nominated oil ministry caretaker is likely to represent Iran at Vienna.
Late Thursday, the president appointed Mohammad Aliabadi as the caretaker of the oil ministry.
With the Islamic Republic having assumed the group’s rotating presidency beginning this year, Aliabadi would apparently chair the crucial oil policy meeting Wednesday in Vienna.
The Opec meeting is taking place in an environment when global crude prices are hovering around $100 a barrel and the Brent trading at around $15 premium over it.
Pressure seems to be growing on OPEC to open the taps further.
Markets urgently require more oil, says Fatih Birol, the IEA’s chief economist, emphasizing, ‘we are seeing impact of high oil prices in the USA and China where in the first case, economic revival is slower and in the second case inflation is rising.’
And indications are now growing that OPEC is getting prepared to give in.
Signals on the horizon have been reinforcing the impression.
Voices from Saudi Arabia are emphasizing that prices ought to stay around the $70-80 target band.
Indeed Riyadh is opting to have a long-term view of the markets.
Reports now confirm that OPEC is considering enhancing the output for the first time since 2007 — apparently to weaken $100 oil prices and lessen the drag of high energy costs on economic growth.
“There is a need for an increase to replace the loss from Libya,” an OPEC delegate was quoted as saying in a Reuters report.
“Oil prices are too high. $100 oil is scaring people.”
The most likely outcome of the meeting would be for a rise of one million bpd, he added.
The OPEC Economic Commission Board, which met earlier Friday in Vienna, too suggested that OPEC should raise output to meet the rise in demand expected in the second half of the year, but it didn’t recommend a particular amount for the hike, a senior Gulf OPEC delegate confirmed.
Accordingly, the organization’s most likely option was to increase the output.
“The most likely outcome of the meeting will be an increase,” the official told Dow Jones Newswires.
“But that amount of the increase is yet to be decided by OPEC ministers. All the numbers in the market now are just a guess work,” he said.
OPEC also admits that the call on its crude is expected climb by over two million bpd between the second and third quarters of the year.
Analysts are closely looking at the increment. A nominal increase of one million bpd would result in only a small increase over the current actual oil supply from the group.
That was because part of the rise would simply absorb above-target supply that some members of the group in OPEC were already pumping. The 11 members of the group bound by OPEC production targets pumped 26.23 million bpd in May, nearly 1.4 million bpd above their 24.84 million bpd target.
Petroleum and Mineral Resources Minister Ali Al-Naimi, often referred to as the heavy weight within the OPEC ranks, too is conceding that the producers are ready to raise production to meet any increase in demand.
During a visit to Poland, when asked whether the Organization of the Petroleum Exporting Countries would agree to raise oil production at its next meeting, Al-Naimi said, “That depends. We have to wait and see the data. If there is a need for an increase, we would decide accordingly. If there is no need, we will not. And in the meantime, for a change, Iran also seems to be emitting a rather different signal.
The Financial Times reported that Mohammad Ali Khatabi, Tehran’s permanent representative at the OPEC, is acknowledging that there exists a “global shortage in the supply of crude” and promised that OPEC will keep the market in balance.
He added: “OPEC will continue its onerous duty, which is to create balance in the market.”
This could be considered as a significant change.
The OPEC move, if at all, to raise production quotas this Wednesday, appears designed not only to thwart markets from overheating, but also preventing the organization from becoming irrelevant.
If eyes are now focused on Vienna — indeed there are enough reasons for that - one can’t help underlining at this very moment.
