OPEC decided to maintain production at 30 million barrels per day (bpd) in line with market expectations following the conclusion of its 161st meeting here in Vienna. Frustrated at unilateral increases in production by Saudi Arabia, the cartel merely noted in a statement that member countries “should adhere to the production ceiling.”
How on earth OPEC will monitor whether (or not) members flout their quota is open to question as individual quotas were shunned last year. All it can do is hope the Saudis, who are currently dovish on the price of crude, decide to cut back.
The Oilholic is reliably informed that five other OPEC members, excluding the usual suspect Iran, urged the Saudis to respect the ceiling and cut back production. At least three oil ministers left OPEC HQ whinging that members ought to respect the production ceiling and that an oil price below US$100 per barrel was unacceptable. Unsurprisingly they hailed from Iran, Algeria and Venezuela. Apparently even the UAE is unhappy but no one from their delegation openly criticised the Saudis at the end of the meeting.
On supply-demand permutations, OPEC noted that although world oil demand is projected to increase slightly during the year, this rise is expected to be mostly offset by the projected increase in non-OPEC supply.
In addition, comfortable OECD stock levels – which presently are below the historical average in terms of absolute volumes but well above the historical norm in terms of days of forward cover – indicate that there has been a “contra-seasonal stock” build in the first quarter 2012 and this overhang is predicted to continue throughout 2012 according to the cartel. Stocks outside the OECD region have also increased. Taking these developments into account, the second half of the year could see a further easing in fundamentals, despite seasonally-higher demand, it said.
OPEC also said it reviewed recent oil market developments, as well as the outlook for the second half of 2012, noting that the heightened price volatility witnessed earlier this year was a reflection of geopolitical tensions and increased levels of speculation in the commodities markets, rather than “solely a consequence of supply/demand fundamentals.”
Furthermore, the cartel observed heightened Eurozone sovereign debts concerns and the consequent weakening economic outlook, with its concomitant lower demand expectation, continue to mount. “These ongoing challenges to world economic recovery, coupled with the presence of ample supply of crude in the market, have led to the marked and steady fall in oil prices over the preceding two months,” it concluded.
How on earth OPEC will monitor whether (or not) members flout their quota is open to question as individual quotas were shunned last year. All it can do is hope the Saudis, who are currently dovish on the price of crude, decide to cut back.
The Oilholic is reliably informed that five other OPEC members, excluding the usual suspect Iran, urged the Saudis to respect the ceiling and cut back production. At least three oil ministers left OPEC HQ whinging that members ought to respect the production ceiling and that an oil price below US$100 per barrel was unacceptable. Unsurprisingly they hailed from Iran, Algeria and Venezuela. Apparently even the UAE is unhappy but no one from their delegation openly criticised the Saudis at the end of the meeting.
On supply-demand permutations, OPEC noted that although world oil demand is projected to increase slightly during the year, this rise is expected to be mostly offset by the projected increase in non-OPEC supply.
In addition, comfortable OECD stock levels – which presently are below the historical average in terms of absolute volumes but well above the historical norm in terms of days of forward cover – indicate that there has been a “contra-seasonal stock” build in the first quarter 2012 and this overhang is predicted to continue throughout 2012 according to the cartel. Stocks outside the OECD region have also increased. Taking these developments into account, the second half of the year could see a further easing in fundamentals, despite seasonally-higher demand, it said.
OPEC also said it reviewed recent oil market developments, as well as the outlook for the second half of 2012, noting that the heightened price volatility witnessed earlier this year was a reflection of geopolitical tensions and increased levels of speculation in the commodities markets, rather than “solely a consequence of supply/demand fundamentals.”
Furthermore, the cartel observed heightened Eurozone sovereign debts concerns and the consequent weakening economic outlook, with its concomitant lower demand expectation, continue to mount. “These ongoing challenges to world economic recovery, coupled with the presence of ample supply of crude in the market, have led to the marked and steady fall in oil prices over the preceding two months,” it concluded.
Meanwhile no decision has been taken as yet on who would replace OPEC Secretary General Abdalla Salem al-Badri of Libya with four member countries having proposed candidates – old rivals Saudi Arabia and Iran along with perceived compromise candidates in Iraq and Ecuador. Finally, OPEC will convene for its 162nd meeting in Vienna on December 12, 2012. However, some delegates left suggesting that if economic fundamentals deteriorate further an extraordinary meeting maybe called before December.
On a lighter note, so predictable was the outcome of the 161st meeting, that the Oilholic’s blog post from December 14, 2011 (on the 160th meeting) notched up a quite a few clicks from ‘Googlers’ searching “OPEC outcome” and “30 million bpd” before one could biff out this post. As was the case on December 14, 2011, so it was on June 14, 2012 – the ‘official’ production quota remains capped at 30 million bpd.
This is the first instance since yours truly has been blogging or reporting from OPEC, when the price of the crude stuff has dipped more than 10% over a fiscal quarter and the cartel has not responded with a cut in its output. Given whats going on in the Eurozone, a cooling in India and China and a poor US recovery, Brent is unlikely to find a medium term US$100 price floor. If anyone thought there was a counterweight to the Saudis within OPEC, this outcome is your answer! That’s all for the moment folks. Keep reading, keep it 'crude'!
© Gaurav Sharma 2012. Photo: OPEC Logo, Vienna, Austria © Gaurav Sharma 2012.
