OPEC ministers were on Wednesday poised to hold output steady, resisting pressure from top consumer the United States to pump more oil to help prop up a fragile economy.
OPEC has said triple-digit oil has been driven by factors beyond its control, such as a weak dollar and speculation and not by any lack of fuel. US crude hit a record of $103.95 a barrel on Monday and was trading at around $100 on Wednesday. Washington has said even a token supply increase from the Organization of the Petroleum Exporting Countries would help to tame prices. But OPEC ministers, including those closely allied with the United States, see things differently. Most have said output should be kept steady and a minority has backed a cut. The group’s most influential minister Ali al-Naimi of Saudi Arabia said in an interview published on Wednesday there was no need to change output because market fundamentals were healthy. Oil’s rally, he said, was the result of “tremendous speculation. This speculation has no link to the stable market fundamentals, which do not need any action," the al-Hayat newspaper quoted Naimi as saying. “Why then should any new action be taken if the health of the market that we follow...is sound?” OPEC’s President Chakib Khelil of Algeria also told Reuters on Wednesday he expected output policy to stay unchanged. “As far as I know there is nothing new,” he said.
Lower demand, higher stocks?
But Khelil and other ministers have predicted stock levels could build during the Q2, when consumption typically tapers off following the end of winter. He has also said a seasonal decline in demand could be exaggerated by the impact of economic slowdown. Concerns about the US economy have already helped to pull oil prices down from the record hit at the start of the week. Washington said a modest output increase of 300,000 barrels per day (bpd) to 500,000 bpd could calm prices and help to contain any economic damage. “I think it’s a mistake to have your biggest customer’s economy to slow down ... as a result of high energy prices,” US President George W. Bush said on Tuesday. Regardless of any formal output decision, OPEC members can adjust production quietly. Saudi Arabia has been pumping steadily at about 9.2 million bpd for several months, some 300,000 bpd above its formal OPEC target, a senior Gulf OPEC delegate said on Wednesday. The exporter group’s 13 members, who pump more than a third of the world’s oil, could have an opportunity to reassess the market at producer-consumer talks in Rome on April 20-22. (Reuters)