OPEC Might Not Increase Output
The Organization of the Petroleum Exporting Countries may leave its oil-production quotas unchanged at a meeting this week, after Iraq decided late Monday to allow the unconditional return of United Nations weapons inspectors, traders and analysts said.
October crude oil futures prices fell 2% in New York on Tuesday, losing 59 cents to $29.08 a barrel, on the belief that Iraq’s decision makes a U.S. attack less likely. But the price closed well above the low of $28.24 set early in the session, as the White House expressed skepticism about Iraq’s move.
Oil still is up 47% this year, partly on concern that a war would disrupt Middle East supplies.
OPEC will meet here Thursday to consider its first increase in output quotas in two years.
“A weakness in oil prices in the next few days will take the pressure off OPEC to lift production,” said Stuart Smith, an energy analyst at Merrill Lynch & Co. in Sydney, Australia.
OPEC Secretary General Alvaro Silva said ministers will review the effect of U.S.-Iraq tensions on prices when they begin their quota debate.
The cartel is meeting to decide oil production levels for the rest of the year. Officials from Iran, Venezuela and Kuwait have contended that oil prices have risen because of geopolitical concerns, not underlying demand, and that output should not be increased at the risk of lower prices.
Saudi Arabia, the world’s largest oil exporter and OPEC’s most influential member, hasn’t publicly stated its position for the meeting.
Saudi Arabia previously has said the group would boost output in the event that an attack on Iraq reduced supply. But a majority of the group’s members have signaled there’s no need to ship more oil at current prices.
“There is enough oil in the market to meet the oil demand and any expected increase due to cold winter,” said Kuwaiti Oil Minister Sheikh Ahmad Fahad al-Ahmad al-Sabah. Prices are “fair” for producers and consumers, he said in answer to faxed questions before leaving Kuwait for Osaka.
The seasonal rise in demand for heating fuel in the Northern Hemisphere may keep prices from falling much further, some analysts and traders said.
The International Energy Agency estimates that fourth-quarter oil demand will rise to 78.1 million barrels a day, up 1.1 million, or 1.4%, from the year-earlier quarter.
