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12 April 2024

All eyes on record oil prices as Opec prepares to meet

By Agencies


Opec, whose member countries together pump 40 percent of the world's oil, was expected to maintain its official output ceiling on Wednesday as crude prices trade at record highs above $100.

Opec President Chakib Khelil said the 13-member Organisation of Petroleum Exporting Countries would decide to either cut or hold its current daily output level of 29.67 million oil barrels when it meets in Vienna.

"Either we hold (output) steady or we cut in order to restore market balance and stability," Khelil, who is also Algeria's energy minister, said in a statement ahead of Wednesday's meeting.

Opec members Iran and Venezuela are calling on the cartel to cut production when it meets in the Austrian capital, arguing that prices were likely to slide when demand for crude drops during the second quarter.

The March-June period coincides with warmer temperatures in the energy-hungry northern hemisphere, thus reducing demand for heating fuel. 

But should crude futures remain close to historic highs by the time of Wednesday's meeting, the organisation would be unlikely to endorse a cut in production.

"I think we won't do anything if prices stay at this level," Libya's acting Oil Minister Chukri Ghanem told AFP on Friday.

At an extraordinary Opec meeting on February 1 in Vienna -- called amid fears of a global economic slowdown -- the cartel agreed to hold its output quota, insisting the market was adequately supplied.

In sitting tight, the organisation ignored pleas from US President George W. Bush to increase production to help cool soaring prices which weigh on economic growth and push up inflation.

Oil prices had struck a record-high $100 at the start of January. On Friday the price of New York crude hit a fresh peak of $103.05 per barrel.

"Prices have been pushed higher this month (February) on geopolitical factors ... a weaker US dollar and suggestions that Opec might agree to cut output at its next meeting," said Helen Henton, head of commodity research at Standard Chartered.

"With prices hovering around $100 per barrel it will be politically difficult to officially endorse an output target cut, but in this event the members will likely begin to surreptitiously curb output ahead of weaker demand in the second quarter," she added.  

The price of oil has doubled since the start of 2007 -- a major reason being soaring demand for energy from emerging economic powers China and India.

Another factor pushing up the price of crude has been unrest in oil producing countries, notably Iran and Nigeria, against a backdrop of tight supplies.

While US crude reserves are rising, oil exporting countries, with the exception of Saudi Arabia, are accused by analysts of failing to invest sufficiently in infrastructure needed to produce oil. 

"Crude futures remain well supported on various factor including the weak dollar, geopolitical tensions and Opec 's resilience to boost supplies," said Sucden oil analyst Andrey Kryuchenkov.

"However, it is very unlikely that we will see more robust gains if economic jitters persist and we see a further significant slowdown in the US energy demand growth," he added.

Opec comprises Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

Iraq is the only member without an output quota owing to persistent unrest in the country. (AFP)