OPEC expected to keep oil production steady at Vienna meeting

The meeting on Sunday is on the same day Iraqis go to the polls in historic, and possibly bloody elections, but an Organisation of Petroleum Exporting Countries’ source said the dates were a coincidence and no sort of political statement, even if the Iraqi minister has said he will not be coming to Vienna.

Bruce Evers, of London’s Investec Securities, told AFP by phone that OPEC was meeting at the end of January in order to be ready to cut production by mid-March in time for warmer spring weather, and reduced demand for crude, in the northern hemisphere.

But Evers said current price levels, driven by worry about Iraq and other global factors as well as continued high demand from strong Asian economies like China, meant there should be no production cut, or at most half a million barrels per day (bpd) from OPEC’s current 27 million bpd quota as a symbolic gesture.

The United Arab Emirates said on Wednesday that it will oppose any reduction in OPEC’s production ceiling. Energy Minister Mohammed bin Zaen al-Hameli told the official WAM news agency that the Emirates wanted to see the maintenance of the current ceiling, echoing similar calls from Kuwait on Tuesday.

"Actual production by OPEC members, including Iraq, is currently around 29 million bpd. Meeting demand during the second quarter of 2005 will require real output of between 28 and 29 million bpd," Hameli said.

Iranian Oil Minister Bijan Namdar Zanghaneh said on Monday that although OPEC believed the oil market was oversupplied it was unlikely to decide on an output cut in Vienna. Zanghaneh said a decision on output would probably be deferred to the cartel’s next meeting in the Iranian city of Isfahan in March.

Oil expert Leo Drollas told AFP from London that OPEC "did not need to do anything really because prices have gone up since they thought of cutting further." He said there had been "a blizzard in the United States, cold weather in Vienna and the Alps and across Britain. Suddenly there is a cold snap and prices are going the other way."

OPEC had cut producton as of January 1. Drollas, from London’s Global Energy Studies oil think-tank, said "the market is tight. I can not see how anyone can think of cutting further."

He said prices have rebounded from $42 a barrel on the week ending Decemeber 10 to be near $50 a barrel now. "So from the markets point of view OPEC should do nothing. They should sit on their hands," although Drollas did not rule a symbolic production cut of half a million bpd as OPEC likes to be pro-active and to show it is looking forward to warmer spring weather in the northern hemisphere, when world demand should drop.

Oil prices on Wednesday were up as traders awaited US commercial fuel stockpile figures, expected to show a drop in key heating oil inventories as the country’s northeast shivers under snow. New York’s main contract, light sweet crude for delivery in March dipped 31 cents to $49.33 in electronic deals, having closed up 83 cents on Tuesday, hitting its highest day-end since November. In London, the price of Brent North Sea crude oil for delivery in March dropped 22 cents to $46.74, following on from a 95-cent rise the previous day.