OPEC expected to hold quotas steady in Thursday announcement
By the OGJ Online Staff
LONDON, Sept. 26 -- Ministers of the Organization of Petroleum Exporting Countries are expected to announce Thursday they will leave the present quotas unchanged, with output at 23.2 million b/d and the target for the basket of crudes in the $22-28 range.
OPEC also is expected to meet again in Vienna Nov. 8 to review the situation in the world oil markets.
However, leaving output quotas unchanged could still lead to tightening of supply, as it is believed OPEC may instigate a system of better policing to ensure all 11 member countries keep to their allotted quotas. A strict interpretation of the system could take almost 500,000 b/d off the market, which would help firm prices.
At a Tuesday meeting in Vienna, the ministers are believed to have taken the view that to make any changes to their present price and output policies would only add to market volatility, already being affected by expectations that a deepening recession will lead to a fall in oil demand.
Libyan Oil Minister Ahmed Abdulkarim said no change in production was seen as necessary and that OPEC ministers have agreed to monitor the situation. A formal announcement will be made on Thursday, after the oil ministers meet representatives from non-OPEC oil producers Wednesday evening.
Rick Jones, a senior oil analyst with UBS Warburg in London, said that OPEC is acting as had been expected, "doing nothing that should affect the market or lead to it being blamed for price instability."
Although oil markets remain nervous, traders in London said that activity was being prompted by fears of a deepening recession and falling demand rather than fundamentals being affected by any change in OPEC policy.
The price of Brent crude dropped by $1.01 on the London IPE in heavy trading. More than 91,000 trades were recorded compared with 124,000 the day before, and trading for September as a whole is expected to confirm previous reports that the monthly trading record will be broken. Earlier this month trading was averaging 28,000 transactions/day.
One trader said, "People are covering and recovering their positions and this will continue whilst there are concerns about short and medium-term demand. OPEC deliberations are not the major factor concerning us at present."
Unofficial predictions among traders and oil industry analysts in London are that the Brent price will shortly drop to under $20 and that by mid 2002 to near $15.