OPEC Unlikely to Boost Output Again
Crude oil was little changed Friday as OPEC oil ministers gathered for a weekend meeting after four production increases failed to stem a 33% rise in prices this year.
The Organization of Petroleum Exporting Countries will probably maintain current output when members meet in Vienna, analysts said. Crude oil will therefore continue to trade on the basis of changes in weather, they said, because low U.S. heating fuel inventories leave little cushion for sudden cold snaps.
“Nothing is expected to come out of the Vienna summit,” said Nauman Barakat, vice president of global energy trading at ABN Amro Inc. in New York. “We are at the mercy of the weather for the time being.”
Crude oil for December delivery rose 10 cents to $34.02 a barrel on the New York Mercantile Exchange. Prices gained 3.9% this week.
In London, Brent crude oil for December settlement fell 14 cents to $32.02 a barrel on the International Petroleum Exchange.
The four OPEC production increases this year have totaled 3.7 million barrels a day. The cartel provides about 38% of the world’s daily demand for about 76 million barrels of oil.
The producers will maintain their plan of trying to keep oil prices within an agreed range, though members may not automatically increase output if prices surpass the group’s target price, OPEC President Ali Rodriguez said.
OPEC raised daily output quotas by 500,000 barrels starting Oct. 31 after the group’s price benchmark stayed above $28 a barrel for 20 consecutive trading days, as specified by the so-called price-band mechanism.
“We will maintain the band, but there are other factors that are impacting the price,” Rodriguez told reporters in Vienna. An output increase “depends on the situation in the market.”
The OPEC president, who is also Venezuela’s oil minister, has cited high energy taxes in consuming countries, market speculation and delivery bottle-necks as factors beyond the cartel’s control that have contributed to this year’s price run-up.
The price index OPEC monitors has remained above its $22-to-$28 range since Aug. 14, helping to trigger two of the group’s production increases this year. That price stood at $30.79 Thursday.
OPEC’s focus will now be on future cuts in output quotas, analysts said. Demand will peak in the fourth quarter, which may lead to the cartel’s first reduction since 1998, oil ministers have said.
In the past, OPEC has been slow to act to prevent oil prices from dropping too low. An output increase approved at the cartel’s November 1997 meeting came just as Asian economies were slowing and sent oil plummeting to about $10 a barrel a year later.
Heating oil on Thursday soared 5.9% on forecasts for cooling weather next week across almost the entire U.S.
“[Thursday] things got crazy,” said John Kilduff, senior vice president of energy risk management at Fimat USA Inc. “It was indicative of what we will experience through January. Because of our low stocks of heating fuel, we can look forward to lots of price spikes.”
