OPEC watchers expect no changes in oil production quotas
By the OGJ Online Staff
LONDON, Sept. 25 -- A consensus is emerging among "OPEC-watchers" that the Organization of Petroleum Exporting Countries will not make formal announcements of changes in quota levels during a meeting that begins Wednesday.
That view reflects a new confidence by oil traders in OPEC's ability and determination to ensure supplies within a target price band.
Prices on the London International Petroleum Exchange staged an early recovery Tuesday from Monday's $3.29 loss with Brent regaining 78¢ to move up to $22.80, back within OPEC's target range of $22-$28/bbl for its basket of seven crudes.
Traders suggested that the upward movement was created by short-covering and will go little further unless there are any new reasons to suggest that output will fall.
One broker said, "OPEC has done a very good job in the past 2 years, to the extent that some people in the marketplace are questioning the validity of hedging."
OPEC ministers will meet formally in Vienna Wednesday, but some analysts are suggesting discussions will center on making subtle changes to its price-band policy and to a stricter policing of existing output quotas. This will allow it to act more quickly if the $28/bbl ceiling is reached to avoid the organization being accused of profiteering from events other than traditional demand-supply issues.
It will also consider reports that the expected reduction in fuel consumption for commercial airlines will be partially offset by increased military consumption and stocking. Ministers will have analyses of how a delayed global economic recovery will impact on OPEC members.
These are understood to suggest that OPEC will not have to raise output until the second quarter of next year to keep prices in the middle of its target range.
The Russian government, which has observer status at OPEC, said Tuesday that the recent fall in prices is only temporary.