Opec and Ivan bring pressure on oil prices
Opec members have split on whether their output should be increased in a bid to boost global supply that might cause oil prices to drop.
Elsewhere yesterday, traders were unnerved by Hurricane Ivan heading toward the oil and natural gas rigs in the Gulf of Mexico and an attack by insurgents on a crucial pipeline juncture in Iraq that showed the country’s vulnerability.
Some members of the 11-nation Organization of Petroleum Exporting Countries echoed their support for increasing global supply, including oil giant Saudi Arabia, which confirmed that existing quotas were not being observed.
“Opec is doing its part, but Opec is not the only player in town and people do want to make money,” Saudi Oil Minister Ali Naimi said yesterday. “They know there is no better way to make it than to do what they are doing in the market. There is not much that we can do.”
Oil prices have soared in recent months because of the extremely thin margin of spare output capacity worldwide and fears of supply disruptions around the globe.
The two main issues being considered at the meeting are whether to increase quotas and whether to raise the price band, said Leo Drollas, chief economist for the London-based Center for Global Energy Studies.
“Both issues are not relevant today because the market is still tight and most Opec countries are very near capacity. … There’s nothing they can do or say” to change the market, he said, describing the meeting as “a bit of a nonevent.”
Late yesterday, an Opec panel decided to recommend that ministers raise their output ceiling by 500,000 barrels a day, delegates said. The panel, which will present the proposal tomorrow, also suggested that the group meet again in November or December to assess the market.
Predicting that prices would stay at current high levels through the end of the year, Drollas said “the demand side drives the prices, rather than the supply side.”
Nigeria’s Opec representative, Edmund Dakoru, said he wanted the Opec price band to be raised to 30-40 dollars from its current 22- 28 dollars.
“The market is well-supplied,” he said.
In trading yesterday, Hurricane Ivan was blamed for a rise in crude future prices. Analysts said that regardless of where the hurricane made landfall, its size was sure to threaten many oil rigs and platforms off the coast of the US. Several rigs in the Gulf of Mexico have been evacuated and production halted as Ivan moved north.
Jan Stuart, head of energy research at FIMAT USA, a brokerage unit of Societe Generale, said Shell began pulling workers off its platforms Sunday. BP and others followed suit Monday.
Light sweet crude futures for October delivery rose 52 cents to settle at $44.39 on the New York Mercantile Exchange. On London’s International Petroleum Exchange, Brent crude futures closed up 67 US cents at $41.73, off its intraday high of $42.02.
