(THE WALL STREET JOURNAL via Dow Jones), Dec. 18, 2009
The Organization of Petroleum Exporting Countries is expected to keep production steady when it meets Tuesday, but members are bracing for a potentially challenging year that could see oil prices weaken at a time when some OPEC nations are in need of price increases.
Oil prices have risen nearly 60% this year, thanks in part to OPEC production cuts. But the cartel faces problems heading into 2010. Some members, such as Iraq and Venezuela, are increasing output even as OPEC tries to purge a huge buildup of oil. And waning stimulus efforts could pinch consumer demand for oil in industrialized nations.
The equation may add up to downward pressure on prices. "The problem (for OPEC) could be the second half of 2010" as those issues take hold, said Deutsche Bank chief economist Adam Sieminski.
All recent signs from OPEC ministers indicate the group will again keep its formal production cuts in place Tuesday when it meets next week in the Angolan capital, Luanda.
Unlike non-OPEC states such as Russia, which maximize output, OPEC states cut their output at times to keep a relatively tight leash on unused oil inventory stored in consuming nations.
OPEC has cut at least 2.4 million barrels a day of production this year to reduce the excess oil resulting from weak demand -- and that policy has buoyed prices. Investors betting on China's economic recovery have also pushed up oil prices, which closed Thursday in New York down $0.01 at $72.65 a barrel.
But the group's production has been on the upswing in past months and topped a year-high level of almost 29 million barrels a day in November as some member states, under economic pressure, pushed more barrels into the market to capture more revenue from higher oil prices.
Venezuela has been in a deep recession this year, despite pocketing many billions of dollars in recent years. Some analysts, such as PFC Energy, estimate that Venezuela needs an oil price of around $100 a barrel to keep its spending commitments.
Copyright (c) 2009 Dow Jones & Company, Inc.
Most Popular Articles
From the Career Center
Jobs that may interest you