OPEC hikes output, but oil market tensions remain
Thursday, 13 September 2007
VIENNA, Sept 12 (AFP): OPEC oil exporters have agreed to increase their output by about 2.0 per cent from next month, but oil markets are set to remain tense for the remainder of the year, analysts believe.
Despite the OPEC decision, prices in New York finished at their highest closing level ever yesterday at 78.23 dollars, not far off their all-time record of 78.77.
The decision yesterday by the Organisation of Petroleum Exporting Countries to pump an extra 500,000 barrels per day from the start of November was intended to signal the cartel's willingness to respond to supply fears in consumer countries.
But analysts forecast that oil stocks will continue to fall in rich countries during winter months in the northern hemisphere -- the peak period for demand-applying upward pressure on prices.
"The additional volumes will help, but not alter the fundamentals to an extent where the stock levels do not slide precipitously," said analyst Simon Wardell at research group Global Insight.
"Clearly there will remain a considerable amount of upside price risk."
Geopolitical risks, a lack of global refining capacity and fear of hurricane damage to Atlantic oil installations have also been driving crude prices higher.
Analyst David Kirsch from Washington-based consultancy PFC Energy said the OPEC decision "will take some of the near-term supply concerns off, but shouldn't put too much downward pressure on markets."
Analyst John Hall from London-based John Hall Associates called the move a "token gesture."
Saudi Arabia appeared to have forced through the increase in the face of stiff opposition from the majority of its OPEC partners, notably OPEC price hawks Iran and Venezuela.
Until the weekend, an output increase had been entirely discounted, but tension in markets and pressure from consumer countries led the Saudi kingdom, a close US ally, to spearhead a campaign for action.
Kirsch from PFC said that the oil exporters' group could still decide to increase output at its next meeting in December in Abu Dhabi, but had been reluctant to put more oil on the market at the meeting in Vienna.
Despite the OPEC decision, prices in New York finished at their highest closing level ever yesterday at 78.23 dollars, not far off their all-time record of 78.77.
The decision yesterday by the Organisation of Petroleum Exporting Countries to pump an extra 500,000 barrels per day from the start of November was intended to signal the cartel's willingness to respond to supply fears in consumer countries.
But analysts forecast that oil stocks will continue to fall in rich countries during winter months in the northern hemisphere -- the peak period for demand-applying upward pressure on prices.
"The additional volumes will help, but not alter the fundamentals to an extent where the stock levels do not slide precipitously," said analyst Simon Wardell at research group Global Insight.
"Clearly there will remain a considerable amount of upside price risk."
Geopolitical risks, a lack of global refining capacity and fear of hurricane damage to Atlantic oil installations have also been driving crude prices higher.
Analyst David Kirsch from Washington-based consultancy PFC Energy said the OPEC decision "will take some of the near-term supply concerns off, but shouldn't put too much downward pressure on markets."
Analyst John Hall from London-based John Hall Associates called the move a "token gesture."
Saudi Arabia appeared to have forced through the increase in the face of stiff opposition from the majority of its OPEC partners, notably OPEC price hawks Iran and Venezuela.
Until the weekend, an output increase had been entirely discounted, but tension in markets and pressure from consumer countries led the Saudi kingdom, a close US ally, to spearhead a campaign for action.
Kirsch from PFC said that the oil exporters' group could still decide to increase output at its next meeting in December in Abu Dhabi, but had been reluctant to put more oil on the market at the meeting in Vienna.