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Opec finds no change in market fundamentals
The Organisation of Petroleum Exporting Countries (Opec) yesterday decided to leave its production unchanged for the time being, based on the assessment that the oil market continues to be well supplied, with comfortable levels of forward cover in terms of days for commercial crude and product stocks.
- By Himendra Mohan Kumar, Staff Reporter
- Published: 23:14 December 5, 2007
- General Shaikh Mohammad Bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, received Opec ministers who attended the meeting.
- Image Credit: WAM
Abu Dhabi: The Organisation of Petroleum Exporting Countries (Opec) yesterday decided to leave its production unchanged for the time being, based on the assessment that the oil market continues to be well supplied, with comfortable levels of forward cover in terms of days for commercial crude and product stocks.
At the end of the day-long extraordinary meeting in Abu Dhabi, the group which produces more than 40 per cent of the world's oil said that market fundamentals have essentially remained unchanged despite calls for more supply to ease prices.
Crude prices on the New York Mercantile Exchange jumped $2 a barrel after the news. Crude oil futures for January delivery in the US were hovering around $90 a barrel yesterday.
However, Opec members expressed concern over "world oil prices [which] remained volatile, in major parts due to the perception of market tightness by market players, exacerbated by non-fundamental factors, including the heavy influx of financial funds into commodities and speculative activity in the markets, whilst geopolitical developments have contributed to price volatility," a statement from the group said.
Asked if the outcome of yesterday's meeting would lead to the next bull-run toward $100 per barrel oil amid rising demand ahead of peak winter season in the northern hemisphere, and whether Opec has set any new price targets, Opec president and UAE Energy Minister Mohammad Bin Dha'en Al Hamili told a news conference: "We do not in Opec set the price. We focus on the adequacy of supplies to the market and the prices are determined by the markets.
"Of course, we are concerned about high prices."
Al Hamili also said there is currently a disconnect between market fundamentals and oil prices and that Opec is building its production capacity to calm the markets.
Objective
"Our action is in favour of a stable market," said Opec secretary general Abdullah Al Badri. "There is no reason whatsoever for the price to go up to $100 or so, as we have enough stock in the market at this stage."
Al Badri said there is currently forward stock cover for over 52 days.
Opec's crude output target is currently set at 27.253 million barrels per day. Twelve Opec members pumped 31.14 million barrels of crude a day in November, while the 10 members subject to quotas produced 27.09 million barrels a day, according to the latest available estimates.
"The conference unanimously agreed that members Angola and Ecuador should have a production allocation of 1.9 million barrels per day and 520,000 bpd, respectively," the Opec statement said.
Oil market analysts said the target price for oil traders still remains $100 per barrel.
"Today's decision is a signal that production will stay relatively tight during the high-demand winter quarter in the northern hemisphere," said Kate Dourian, editor at energy information provider Platts Middle East.
Jim Crawford, consultant with the Sharjah-based Inter Emirates Project Development, said: "Unless there's a significant disruption in supplies, oil prices will probably remain below $100 per barrel."
The group will meet again next February 1 at its Vienna headquarters to review yesterday's decision.
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