OPEC 'maintains' production at 30 million bpd

In line with market expectations and persistent rumours heard here all morning in Vienna, OPEC has agreed to officially maintain its crude production quota at 30 million barrels per day (bpd) at its 160th meeting, thereby legitimising the increase the Saudis triggered after the acrimony of the last meeting in June.

The OPEC Secretary General Abdalla Salem El-Badri said the heightened price volatility witnessed during the course of 2011 is predominantly a reflection of increased levels of speculation in the commodities markets, exacerbated by geopolitical tensions, rather than a result of supply/demand fundamentals.

Ministers also expressed concern regarding the downside risks facing the global economy including the Euro-zone crisis, persistently high unemployment in the advanced economies, inflation risk in emerging markets and planned austerity measures in OECD economies.

“All these factors are likely to contribute to lower economic growth in the coming year. Although world oil demand is forecast to increase slightly during the year 2012, this rise is expected to be partially offset by a projected increase in non-OPEC supply,” El-Badri noted.

Hence, OPEC decided to maintain the production level of 30 million bpd curiously “including production from Libya, now and in the future”. The quota would be reviewed in six months and does not include Iraqi supply. The cartel also agreed that its members would, if necessary, take steps including voluntary downward adjustments of output to ensure market balance and reasonable price levels.

The last bit stirred up the scribes especially as El-Badri, himself a Libyan, noted that his country’s production will be back to 1 million bpd “soon” followed by 1.3 million bpd end-Q1 2012, and 1.6 million at end of Q2 2010; the last figure being the pre-war level.

Despite persistent questioning, the Secretary General insisted that Libyan production will be accommodated and 30 million bpd is what all members would be asked to adhere to formally. He added that the individual quotas would be reset when Libyan production is back to pre-war levels.

El-Badri also described the "meeting as amicable, successful and fruitful" and that OPEC was not in the business of defending any sort of crude price. “We always have and will leave it to market mechanisms,” he concluded.

Iran's Rostem Ghasemi said the current OPEC ceiling was suitable for consumers and producers. “We and the Saudis spoke in one voice.” He also said his country was "cool" on possible oil export embargoes but neither had any news nor any inclination of embargoes being imposed against his country yet. OPEC next meets in Vienna on June 14th, 2012.

Following OPEC’s move, the Oilholic turned the floor over to some friends in the analyst community. Jason Schenker, President and Chief Economist of Prestige Economics and a veteran at these events, believes OPEC is addressing a key question of concern to its members with the stated ceiling.

“That question is how to address the deceleration of global growth and pit that against rising supply. And what OPEC is doing is - not only leaving the production quota essentially unchanged but also holding it at that unchanged level,” Schenker said.

“When the Libyan production does indeed come onstream meaningfully or to pre-war levels between now and Q2 or Q3 of 2012, smart money would be on an offsetting taking place via a possible cut from Saudi Arabia,” he concluded.

Myrto Sokou, analyst at Sucden Financial Research, noted that an increase (or rather the acknowledgement of an increase) in the OPEC production limit after three years might add further downward pressure to the crude price for the short-term with a potential for some correction lower in crude oil prices.

“On top of this, the uncertain situation in the Eurozone continues to dominate the markets, weighting heavily on most equity and commodity prices and limiting risk appetite,” he said. And on that note, it is goodbye from the OPEC HQ. Keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo: OPEC's 160th meeting concludes in Vienna, Austria - seated (R to L) OPEC Secretary General Abdalla Salem El-Badri and President Rostem Ghasemi © Gaurav Sharma 2011.

OPEC's tiffs patched-up! Its all crudely good!

An announcement is expected on OPEC quota much earlier than expected at 14:00CET instead of 16:00CET. Instead of the rows we saw last time, things on this instance were so amicable that they've wrapped up early. Saudi minister Ali Al-Naimi has left the building having patched-up with his Iranian counterpart, a trusty Venezuelan has just confirmed that a 30 million bpd OPEC quota agreement is a done deal and the Oilholic has just done a comment piece on an OPEC TV webcast.

Rostam Ghasemi, Minister of Petroleum of Iran and current President of the OPEC Conference noted that the last meeting on June 8th, the international oil market has witnessed further volatility. The OPEC Reference Basket price has risen to US$113 a barrel on several occasions, and it fell below US$99 a barrel briefly at the start of October as well.

“Uncertainty about economic growth translates into uncertainty about oil demand. In the aforesaid five-month period, we have reduced our forecast for world oil demand growth in 2012 by around 600,000 barrels a day. This leaves us with a demand growth estimate for 2012 of 1.1 million barrels per day over 2011,” Ghasemi said.

“Therefore, when reviewing the market outlook for 2012 and beyond, we face a very unclear picture. On the one hand, we are committed to ensuring that the world oil market is always well-supplied. Yet, on the other hand, we are faced with the prospect of a world economy which could swing either way in the coming months. It could enter a welcome period of sustainable economic recovery or return to a new downturn or even recession,” he added.

A relatively small impulse in an economy, or a group of economies, could be a deciding factor in this unstable global environment. The situation is not helped by the still considerable influence of the international financial sector in over-stating market trends in one direction or another, out of line with fundamental factors,” Ghasemi continued.

All this, according to Ghasemi presents a huge challenge to OPEC's Member Countries, when it comes to investing in future production capacity in an industry with high capital-outlays and long lead-times. More shortly, after the official confirmation of the OPEC quota!

© Gaurav Sharma 2011. Photo: OPEC HQ, Vienna, Austria © Gaurav Sharma 2011.

On OPEC chatter & Libyans who matter!

Credible information and several statements made on arrival in Vienna by OPEC ministers and member nations’ delegates suggest that price hawks – chiefly Iran – will now accept an 'official' rise in production quota by Saudi Arabia and its allies Kuwait and Qatar.

That would mean the cartel would now legitimise and accept a stated production cap of 30 million barrels per day (bpd) for all members after talks on the issue fell apart in June and OPEC ministers left in a huff without formally outlining the output cap.

Saudi Oil Minister Ali al-Naimi has already been flexing his ‘crude’ muscles. If, as expected, an OPEC agreement puts a 30 million bpd production cap on all 12 OPEC member nations, this would keep the cartel’s production in the region of a 3-year high. The stated volume would meet demand and leave enough surpluses to rebuild lean stocks by 650,000 bpd over the period according to OPEC.

Sucden Financial Research’s Jack Pollard notes that an OPEC production ceiling could provide some upside support if approved; Saudi opposition could suppress calls from Iran. The return of Libyan and Iraqi crude oil should alleviate the market’s tight supply conditions.

“As we come to the year-end, the contrasting tail risks in Europe and the Middle-East seem most likely to dominate sentiment. Increased sanctions on Iran which could cut production by 25%, according to the IEA, could mitigate the worst of the losses if the situation in Europe deteriorates,” he concludes.

Assurances are also being sought here to make room for Libya's supply coming back onstream so that collective production does not exceed 30 million bpd as ministerial delegations from Algeria, Kuwait, Nigeria and the OPEC secretariat met here today, ahead of tomorrow’s proceedings.

Most OPEC producers would be comfortable with an oil price of US$80 per barrel or above, while the Venezuelan and Iranian position of coveting a US$100-plus price is well known. Kuwait Oil Minister Mohammad al-Busairi told reporters, “The market is balanced, there is no shortage and there is no oversupply. We hope there will be an agreement that protects global economic growth.”

As talk of Libyan production coming back onstream gains steam here at OPEC, the Oilholic thinks the key figures on the Libyan side instrumental in bringing that about could or rather would be Abdel Rahim al-Keib (a key politician), Rafik al-Nayed (of Libya’s investment authority) and Abdurahman Benyezza (Minister of Oil and Gas). International companies BP, Eni, Occidental Petroleum, OMV and Repsol will figure too with operations in the country. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo: 160th OPEC press conference table © Gaurav Sharma 2011.

IEA, crude price & Al-Naimi’s strong arm tactics!

The Oilholic arrived in Vienna this morning ahead of the 160th OPEC meeting from sunny Doha via a gale force wind hit London, to hear that the IEA had a new message for the cartel. The agency's latest market report notes that OPEC will need to produce “less” crude over 2012 than previously forecast. Global demand will average 90.3 million barrels per day (bpd) over 2012, which is 200,000 barrels less than the IEA’s November estimate.

This marks the fourth cut in the IEA’s 2012 forecast. Meanwhile, before the OPEC meeting outcome is officially known, the ICE Brent forward month future contract came in at US$109.41 up 2.15 cents or 2% while WTI came in at US$100.00 up 1.17 cents or 1.1 per cent when the Oilholic last checked at 19:00CET. Concurrently, the OPEC basket of crudes price stood at US$107.33 on Monday.

Meanwhile, Saudi oil minister Ali al-Naimi arrived in Vienna with more than the customary aplomb declaring to the World’s press that his country’s output had topped 10 million bpd, the highest it has been in recent memory. If his idea was to get price hawks Algeria, Iran and Venezuela to acknowledge an appreciable rise in Saudi supply, since the shenanigans of the last meeting of the cartel in June, then sources suggest it just might have succeeded.

The geopolitical pretext of course is that the Saudis wanted to make up for lost Libyan supplies.

© Gaurav Sharma 2011. Photo: OPEC crest © Gaurav Sharma 2011.

OPEC, Libya, Vitol & the “No winners” brigade

Now that the meeting is all over, it is worth noting that the ‘acting’ Iranian oil minister – Mohammad Aliabadi – was not the only one new to the job. It would appear that half of his peers at the OPEC meeting were in fact new to the job as well but Alibadi had to carry the tag of “Conference President”. One question on everybody’s lips was who spoke for Libya at this OPEC meeting.

The man from Tripoli was the right honourable Omran Abukraa, Libya's OPEC delegation leader. His appearance follows the defection last week of a familiar face in these parts – that of Libyan oil minister Shukri Ghanem. The Oilholic is reliably informed that no one was representing the Libyan rebels in a meaningful way here. This, as someone from the Nigerian delegation told the Oilholic, removes a “point of tension.”

In the run up to this meeting, news from Tripoli was that Col. Gaddafi was controlling the oil assets that he could and was destroying those that he could not in order to prevent them from both falling into rebel hands or being used as a revenue generator. Once rebels took control of some of the country’s oil assets, troops loyal to Gaddafi set about knocking out the infrastructure.

Coastal road between Brega and Ras Lanuf, sites of the country’s two biggest refineries was taken out. Then the gas network linking up to rebel controlled areas fell to below 50% capacity. This was followed by Sarir and Mislah oilfields, south of Benghazi being hit by Gaddafi’s troops. While estimates vary, all this has collectively deprived the rebels access to up to 350,000 barrels of oil which they could have sold in open markets.

Now until these facilities can be repaired, the rebels cannot really export much even though the Qataris have volunteered to help them market the oil. Their only success so far, according to sources has been a sale facilitated by Vitol, a Swiss trading house, to the tune of just over one million barrels worth US$118.75 million at the current rate. Additionally, Gaddafi is not in ‘crude’ health either.

A source here suggests Libyan production is in the region of 215,000 b/d but output has ceased as admitted this afternoon by the OPEC Secretary General Abdalla Salem el-Badri. Given international sanctions, the buyers, at least on the open market, are hesitant. Additionally, Libyan consumers are facing shortages everywhere including the capital Tripoli where a litre of petrol is costing up to 6.5 Libyan dinars; about US$5.13 at the current rate. The Oilholic is unable to ascertain how much a litre costs in rebel held areas although it is thought to be a lower rate than Tripoli.

News from behind closed doors is that Col. Gaddafi’s representative did not find himself clashing with the Qatari delegation, who have helped the rebels to their market oil. However, there was an almighty collective clash between the OPEC member nations in which Gaddafi’s man did take the opposing view of what the market felt was right. This understandably overshadowed everything else. On that note its goodbye and goodnight from Vienna - thanks for reading.

© Gaurav Sharma 2011. Photo: Oil pipeline © Cairn Energy, India

OPEC’s 'problem' and Dr. Chalabi’s book

The decision or rather non-decision of not raising the OPEC production quota taken earlier here in Vienna is as damaging for OPEC as it is problematic. A cartel is supposed to show solidarity, but internal sparring awaited the world’s press. The meeting even concluded without a formal production decision or even a communiqué.

It is clear now that those members in favour of a rise in production quota were Saudi Arabia, Kuwait, Qatar and UAE while those against were Algeria, Libya (Gaddafi’s lot), Angola, Venezuela, Iran and Iraq. However, majority of the sparring was between the Saudis on one side and the Iranians and Venezuelans on the other. In the end, it was not only messy but made the cartel look increasingly dysfunctional and an archaic union heading slowly towards geopolitical insignificance. However, what appears on the face of it is not so straightforward.

To followers of crude matters, it is becoming increasingly clear that as in the past, the Saudis will act to raise their production unilaterally, more so because they left Vienna irked by what they saw as Iranian and Venezuelan belligerence. Furthermore, the cartel’s own spare capacity of around 4 million b/d is squarely in the hands of Saudi Arabia, Kuwait and UAE. Of these, the Saudis pumped an extra 200,000 b/d last month. Most analysts expect this to be mirrored in their June output and it would imply that the Saudis would be producing at least 1 m b/d over the now largely theoretic OPEC binding quota of 24.85 million b/d.

Almost 41% of the global crude oil output is in the hands of OPEC. If within this close-knit group, there is sparring between those with spare capacity and those without in full view of the world’s press then the cartel’s central purpose takes a hammering. Mighty worried about the negative impact of high prices on GDP growth of their potential export markets and by default on the growth of crude oil demand, the Saudis appeared to the Oilholic to be firm believers that it was in their interest to increase quotas and actual production – so they will raise their own.

Yet I do not totally agree with market conjecture that the “end of OPEC is nigh”. Neither does veteran market commentator Jason Schenker of Prestige Economics. He notes: “Some market mavens have heralded this event as 'The end of OPEC' or 'The beginning of the end of OPEC', we do not believe it. Although no formal production decision was reached, there are precedents for what has been going on with the organisation’s production. After all, the group quota was suspended at the peak of the last business cycle in 2008.”

“Furthermore, and more recently, the individual member county quotas were suspended last October. On a more practical note, group cohesion for affecting production and crude oil prices is less critical when the price of crude is over US$100 per barrel and the global economy is rising, along with oil demand. The division within OPEC is likely to heal, and we are confident that group cohesion will be seen again when prices fall,” he concludes.

Additionally with half of those at the table being newcomers to the job, the situation in Libya and their representative, and an Iranian ‘acting’ oil minister with no experience of OPEC negotiations or of ‘crude’ affairs (he was previously the country’s minister for sport) all combined to complicate the situation as well as infuriate the Saudis. This situation should not arise at the next meeting.

Now if all this has left you yearning for a slice of OPEC’s history – whether you are an observer, derider or admirer of the cartel – there is no better place to start than Dr. Fadhil Chalabi’s latest book Oil policies, oil myths: Observations of an OPEC insider.

If there is any such thing as a ringside view of the wheeling and dealing inside OPEC then Dr. Chalabi more than anyone else had that view. The Oilholic found his book, which serves as the author’s memoir of his time at OPEC as well as charts the history of OPEC and its policies, to be a thoroughly good read.

He was the deputy secretary general of OPEC from 1979-89 and its acting secretary general from 1983-88. The book is, in more ways than one, a coupling of an account of his time at OPEC and an objective analysis of what has transpired in the energy business over last four decades. Looking through either prism - both the book's "memoir aspect" as well as the author's charting of the history of OPEC and its policies, it comes across as a thoroughly good read.

The book is just over 300 pages split by 16 chapters over which the author offers his thoughts in some detail about why OPEC is relevant. He also sets about exploding a few myths about the cartel, what has shaped it and how it has impacted the wider industry as well as the global economy.

To substantiate his case, he offers facts, figures, graphics, a glossary and a noteworthy and useful chronology of key events affecting the oil industry. The world has come a long way from the days when the “Seven Sisters” simply posted the oil prices in Platt’s Oilgram news bulletins. The era of price volatility-free cheap oil ended with the price shock of 1973 in the author’s opinion, before which the world had scarcely heard of OPEC.

Gaddafi’s Libya, Saddam’s Iraq and Nasser’s Egypt are all there but the Oilholic found Chapter 7 narrating the episode when Carlos the Jackal struck OPEC (in 1975) to be riveting, for among the hostages taken by the Jackal was the author himself. The book understandably has many fans at OPEC and officials from member nations as seen in its endorsements. However, what makes it enjoyable is that it is no glorification or advert of the cartel.

Rather it is an objective analysis of how crude oil has shaped the diplomatic relations of OPEC members with the oil-consuming nations globally and by default how an oil exporting cartel’s presence triggered ancillary developments in the crude business. This includes changing the investment perspective of IOCs who began facing dominant NOCs. In summation, if you would like to probe the supposed opacity of OPEC, Dr. Chalabi’s book would be a good starting point.

© Gaurav Sharma 2011. Photo 1: OPEC Flag © Gaurav Sharma 2011, Photo 2: Cover: Oil Policies Oil Myths © I.B. Tauris Publishers. Book available here.

No consensus at OPEC; quota unchanged

In a surprising announcement here in Vienna, OPEC ministers decided not to change the cartel’s production quota contrary to market expectations. At the conclusion of the meeting, OPEC Secretary General Abdalla Salem el-Badri said the cartel will wait another three months at least before revisiting the subject.

El-Badri also said the crude market was “not in any crisis” and that no extraordinary meeting had been planned. Instead, the ministers would meet as scheduled in December. However, he admitted that there was no consensus at the meeting table with some members in favour of a production hike while some even suggested a cut.

“Waiting (at least) another three months for a review was not to everyone’s liking but the environment around the table was cordial even though it was a difficult decision,” he said after the meeting. However, as expected, he did not reveal which member nations were for or against a decision to hold production at current levels.

El-Badri put OPEC's April production at about 29 million b/d and refused to answer many or rather any questions on Libya except for the conjecture that while Libyan production was not taking place, others can and will make up for the shortfall within and outside of OPEC.

The surprising stalemate at OPEC HQ has seen a near immediate impact on the market. ICE Brent crude oil futures rose to US$118.33, up US$1.55 or 1.3% while WTI futures rose US$1.30 to 100.61 up 1.3% less than 20 minutes after el-Badri spoke.

He added that the environment was cordial, but many suggested that it was anything but. The Saudis left the building in a huff with minister Ali al-Naimi describing it as the "worst meeting they have attended."

The analyst community is surprised but only mildly with many opining that the Saudis may well go it alone. Jason Schenker, President & Chief Economist of Prestige Economics says, “I think that what we have witnessed today is very similar to the group’s quota suspensions in the past. High volatility in the markets is clearly visible and there was no consensus at the meeting table about how to respond. At the end of the day, most OPEC member countries are going to react to what we have seen today as they see fit. Atop the list are the Saudis – the OPEC heavyweights - who will react as they always do and go it alone.”

Ehsan Ul-Haq, an analyst with KBC Energy Economics agrees with Jason. “Quite simply, if the Saudis want more oil on the market, they don’t need the Iranians, they don’t need the Venezuelans; they can and now probably will do it alone."

No wonder the new man at the table – the meeting’s President Mohammad Aliabadi of Iran spoke of a “nervous” two quarters for the oil market. The Oilholic felt this 159th ordinary meeting would be ‘extraordinary’ and so it has turned out to be. Venezuela, Iran and Algeria reportedly refused to raise production with a Gaddafi-leaning Libyan delegation backing their calls.

Meanwhile, the latest Statistical Review of World Energy published by BP earlier today with an impeccable sense of timing, noted that consumption of oil appreciated on an annualised basis at the highest rate seen since 2004. Christof Ruhl, BP group's chief economist, puts the latest growth rate at 3.1%.

According to BP, much of the increased demand for oil continued to come from China where consumption rose by over 10% or 860,000 b/d. The report also notes the continued decline of the North Sea with Norway, followed by the UK, topping the production dip charts. The take hike announced in the recent UK budget is not going to help stem the decline.

© Gaurav Sharma 2011. Photo: OPEC logo © Gaurav Sharma 2008

Buzz at Central Bank of Oil Before 1600 CET

Ahead of the OPEC decision, prices for the forward month ICE Brent and NYMEX WTI futures contracts have fallen by US$2-3 on average over two weeks if the last fortnight is taken into consideration. That is largely down to the fact that traders have begun to factor in a possible increase in OPEC crude production quotas in the run up to the meeting here in Vienna today.

For the purposes of a price check, at 11:00am CET, ICE Brent is trading at US$116.26 down 0.5% or 16 cents, while WTI is down 99 cents or 1% at US$98.46. Additionally, the OPEC basket of twelve crudes stood at US$110.66 on Tuesday, compared with US$110.99 the previous day according to OPEC Secretariat calculations this morning.

Mike Wittner of Société Générale notes that if an increase in OPEC quota is made from a starting point of actual production, rather than the previous quota, it is that much more real, that much more serious, and potentially that much more bearish, at least in the short term.

“In contrast, if OPEC were to increase quotas by 1.5 million b/d, but versus previous quotas and not actual production, all they would be doing would be legitimising recent/current overproduction versus the old quota,” he adds.

Most analysts including Wittner and those present here believe a physical increase would be coming our way. Speaking of analysts, it is always a pleasure meeting Jason Schenker, President & Chief Economist of Prestige Economics at these OPEC meetings. He’s to be credited for describing OPEC as the Central Bank of Oil. The Oilholic heartily agrees and could not have put it better. Schenker believes OPEC is looking at the medium term picture and not just the next few months.

“As anticipated if there is a production hike today, the thinking at the “Central Bank of Oil” would be that it could carry them across to the end of Q4 2011 perhaps without facing or acting upon further calls for alterations of production quotas,” he says.

On a somewhat 'crude' but unrelated footnote, hearing about my recent visit to Alberta, Canada, Jason agrees there are a whole lot of crude opportunities for Canadians to be excited about. It would not be easy and it is certainly not cheap. But then cheap oil has long gone – this not so cheap resource is in a safe neutral country. Furthermore, one must never say never, but Canadians are not exactly queuing up to join OPEC any time soon (or ever).

Finally on a totally unrelated footnote, one can see the “Made in UK” label at OPEC HQ – it’s the paper cups near the water dispenser - not something extracted from the North Sea.

© Gaurav Sharma 2011. Photo: Oil well in Oman © Royal Dutch Shell

Arriving at the not so ‘Ordinary’ OPEC meeting

The Oilholic probably has to go back to Q1 2008 when an OPEC meeting last generated as much interest as the soon to be held 159th Ordinary meeting of the cartel here in Vienna. Interest of this magnitude usually gains traction when the cartel contemplates an alteration of production quotas. Initial signals are that come 1600 CET tomorrow, we could see a rise in the OPEC member nations’ quotas by 0.5 to 1.5 million b/d.

Such talk has intensified in the three weeks leading up to the meeting. OPEC’s May crude oil production report notes that the cartel’s total crude output was 28.99 million b/d. If Iraq, which is not subject to OPEC quotas at present, is excluded, then the production came in at 26.33 million b/d, or 1.5 million b/d higher than the quota of 24.8 million b/d as set in Q4 2008.

This begs the question, what would the increase be like in real terms – i.e. would it be an increase in paper targets (to which methinks not a lot of attention would or should be paid by the markets) or would it be an increase over the already existing, but not officially acknowledged physical production levels. If it is the latter, then that would be something and Société Générale's Mike Wittner reckons it would be a physical increment rather than a paper one.

Furthermore, in a note to clients, Wittner observes: “Before analysing what OPEC is thinking about, why it will probably increase quotas, and what the dangers are of doing so, it is very important to note the latest signal regarding the meeting. Early Monday evening (EST), it was reported that the Saudi-owned al-Hayat newspaper, based in London, quoted an unnamed source as saying that if OPEC decides to lift its output by more than 1 million b/d, Saudi Arabia’s production will reach about 10 million b/d during the summer period, when its domestic demand increases. This compares to around 8.9 - 9.0 million b/d in May, according to preliminary wire service estimates, with an increase of 0.2 - 0.3 million b/d expected in June, according to various sources."

The initial feelers here seem to be following the norm. The Saudis for instance, according to various media reports, would increase production anyway even if an increase is not announced. Approach of the others is more nuanced while some would suggest there are bigger factors at play rather than a straight cut decision on production.

Earlier today, following a meeting at 1600 CET, a ministerial monitoring sub-committee comprising of ministers from Algeria, Kuwait and Nigeria overseen by the OPEC secretariat proposed a 1 million b/d increment to the existing quotas. This could be a harbinger of what may follow tomorrow. However, few here expect anything other than stiff resistance to an increase in quotas by Iran and Venezuela.

Both countries have provided interesting sideshows. Iran's President Mahmoud Ahmadinejad sacked his oil minister and seized control of his ministry ahead of the meeting. He then appointed his close ally Mohammad Aliabadi as caretaker oil minister after parliament and Iran's constitutional watchdog said the president had no right to head the ministry.

Oilholic regrets that he knows little about the right honourable Aliabadi who has precious little experience of oily matters. Guess being greasily close to Ahmadinejad is a resume builder in that part of the world. Additionally, Venezuela is to complain about US sanctions on PDVSA.

Meanwhile, crude oil futures rose slightly either side of the pond following concerns that OPEC’s spare capacity will tighten pending on what happens tomorrow. OPEC had 5.94 million b/d in spare capacity in May, down 2.7 per cent from April, based on Bloomberg estimates. Spare capacity was 6.31 million barrels a day in March, the highest level since May 2009.

The official line from OPEC as of this evening is – “We’ll pump more if needs be.” But do we? Tracking arrivals of OPEC ministers in Austria one by one since 09:00 CET not one has said much about what may happen on this occasion. Based on past experience that is always a sign that something will happen.

© Gaurav Sharma 2011. Photo: Empty OPEC Press conference table © Gaurav Sharma 2011