Abu Dhabi: Opec’s big Gulf producers kept the door ajar on Tuesday, 4 December, for an increase in crude exports even though cartel members agree world oil supplies are sufficient.
Led by Saudi Arabia, some Gulf members are worried high prices may be exacerbating a downturn in global economic growth, led by a slowdown in the world’s biggest oil importer the United States.
Saudi and its allies the United Arab Emirates and Kuwait face a tough task if they want to persuade others at a Wednesday meeting of the Organization of the Petroleum Exporting Countries to support a production increment after a price slide from record highs.
Crude settled down 99 cents at $88.32 a barrel on Tuesday, falling from a record $99.29 set on 21 November.
Influential Saudi Oil Minister Ali al-Naimi has been careful not to show his hand.
”All options are open,” he said.
Price hawks Venezuela and Iran, backed by Libya and Qatar, are arguing for no change in policy.
”There is no need to do anything now...the market is well supplied,” said Iran’s governor to Opec Hossein Kazempour Ardebili.
Importing nations want Opec to help ease the burden of inflated energy costs.
“I’ve always encouraged them to keep markets well-supplied,” said US Energy Secretary Sam Bodman.
Some in Opec feel its interests are best served by a further price decline that would support the world economy as a 5-year growth spurt slows.
”We think we’re producing enough oil now to build stocks but we’re worried that prices are too high,” said a senior Opec delegate.
”We may have to send a signal to the market that we’re serious about bringing down prices and the only way we can do that it is with an increase, maybe a modest increase.”
Others would prefer to keep prices high, arguing that strong growth in recent years is proof the economy can cope with increasing fuel bills.
”Opec can either rollover and speculators will take the price up again before it comes down when reality hits,” said another Opec delegate.
”Or they can increase, a gesture of 500,000 barrels per day, in order to remove Opec’s name for being a reason for increased high oil prices.”
So far, only minor producer Indonesia, marginal in terms of its influence on policy, has come out in favour of higher output.
”We will support an increase in production if it is needed to lower the price,” Opec governor Maizar Rahman told Reuters.
”Our target is only $60-$70 (a barrel). Developing countries suffer with a higher price.”
When Opec last met in September it signalled an output increase ahead of the meeting only for prices to rise sharply when it agreed a modest 500,000 barrel-a-day, 2%, increment.
While Opec routinely blames speculators for high prices and says it has no sway over the market, analysts here think the cartel still has the muscle to influence prices.
”The perception of a shortage of supply is driving the market,” said John Hall of John Hall Associates. ”If they don’t raise output I think the price could go back up to $100 a barrel and we could see $100 before the end of the year.”
”If Opec doesn’t take action that results in actual barrels being delivered to the market the risk is that prices will resume their uptrend,” said Michael Rothman, head of oil research at US broker-dealer ISI Group.