VIENNA, March 5, 2008 (Dow Jones Newswires)
OPEC held its current production policy unchanged Wednesday, according to senior officials, rebuffing calls from large consuming nations to pump more oil to help alleviate scorching crude prices.
The decision comes amid heightened fears about the health of economic growth in the U.S., the world's largest energy consumer, and against a backdrop of rising crude inventories in the world's industrialized nations.
Despite benchmark crude prices trading above $100 a barrel, the Organization of Petroleum Exporting Countries opted to continue pumping and wait until the energy demand picture in the U.S. becomes clearer.
"The oil market is currently stable," said Saudi Arabia's powerful Oil Minister Ali Naimi. "Stock levels are within the five-year average and there is no need to increase even one barrel of oil."
OPEC's decision comes after President George W. Bush said it would be a "mistake" for the cartel not to raise output.
"I think it's a mistake to have your biggest customer's economy slow down...as a result of high energy prices," Bush said. "My advice to OPEC is understand the consequences of high energy prices."
OPEC, which produces four out of every ten barrels of oil consumed globally, says there's no demand for extra oil and continues to lay the blame for soaring oil prices at the door of what Naimi called "tremendous speculation."
"There are even those who buy futures and speculate that oil prices will reach more than $200 in 2013 and 2015." he said. "The most important thing that OPEC and Saudi Arabia look at is the stability of market factors."
"Heightened levels of speculation have been a major driving force behind the volatility of the past few years, and this has not been welcomed by our organization," added OPEC President Chakib Khelil.
Cut Down The Line?
Crude oil traders say OPEC is powerless to wield much influence over crude oil prices, which are currently taking their cue more from Federal Reserve monetary policy, rising inflation fears and the weak dollar than oil supply and demand factors. Alongside $100 crude, gold is flirting with $1,000 an ounce, and a host of commodities are trading at multiyear highs.
Still, many analysts believe the next few months could herald a change in OPEC policy, with producers either officially or unofficially taking more barrels of oil off global markets in the event of a marked slowdown in the U.S. making a real dent in energy demand. A big uncertainty in this scenario centers on how well developing economies, most notably China and India, can withstand any U.S. slowdown or recession.
"Persistent oil demand in Asia and the Middle East is based on a perception of a less degree of linkage between the U.S. economy and Asian economies," said Tor Kartevold, a special adviser on oil trading to Norway's StatoilHydro ASA. "The jury is still out on that."
OPEC ministers will meet informally on the sidelines of the International Energy Forum in April in Rome, a senior OPEC delegate said. Another OPEC official said the group would likely hold a formal meeting in early May.
OPEC ministers have said they would meet to review demand and market conditions before their next scheduled meeting in Vienna in September.
For his part, Naimi gave an upbeat view of global energy demand for now, confirming the kingdom is pumping 9.2 million barrels a day and finding customers for it. Saudi Arabia, the only true custodian of spare capacity within the 13-member group, has been pumping at this level for several months, some 300,000 barrels a day above its official OPEC quota.
Nymex light, sweet crude broke back above the $100 a barrel mark before the OPEC decision emerged. The rollover was widely anticipated by the crude markets, and had little immediate impact on prices.
"The key will be whether they say 'we're not going to do anything before the next scheduled meeting' or 'we're going to hold another one'," said Jim Rintoul of TheOilTrader. "If the meeting is less than three months away, it would suggest they want to keep hold of this market, and the market would see that as supportive of prices."
On the New York Mercantile Exchange, light, sweet crude for April delivery was recently trading up $1.24 cents and $100.76 a barrel. On London's Intercontinental Exchange, April Brent was up 98 cents at $98.50.
VIENNA, March 5, 2008 (Dow Jones Newswires)
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