Opec under Ahmadinejed

It will be interesting to see who turns up at the next Opec meeting in Vienna on 8 June. Iran, the international oil producers group’s second largest exporter currently holds the presidency.

It is a largely ceremonial position, but it could be filled by Mahmoud Ahmedinejad who this week appointed himself caretaker of the Oil Ministry.

His move had added to recent tensions with the supreme leader Ayatollah Ali Khamenei and many parliamentarians see it as a further attempt to strengthen Ahmadinejad’s direct control over the government, after dismissing Oil Minister Masoud Mirkazemi and two other ministers.

Then there is Libyan Oil Minister, Shukri Ghanem who is rumoured to have defected, which means there could also be a visit from a member of the opposition. Saudi Arabia, along with Qatar and the UAE, would likely support an invitation to Benghazi to send a representative to the Austrian capital. It could be a highly politicised meeting.

In the mean time, global crude oil prices moved slightly higher this week with European benchmark Brent crude traded at $112.460 a barrel on 18 May. US West Texas Intermediate (WTI) crude futures gained a few cents, but remain below $100 a barrel, trading at $99.93 a barrel.

This is still some way off the $60-$70 a barrel target price range proposed by Rex Tillerson, chief executive officer of oil major ExxonMobil, speaking before the US Senate.

The 12-crude basket of exports from Opec traded at $107.40 a barrel on 18 May, the last date for which prices were available.

The group’s reference basket rose averaged $118.09 a barrel in April, up $8.25 from the previous month and $35.76 from a year earlier.

Much of the downward pressure on prices comes from ongoing concern over the global economy and demand.  However, according to analysts at Barclays Capital, “Pent-up consumer demand should emerge at these price levels and we continue to see $110 as a solid floor for Brent under these circumstances”.

World oil demand is forecast by Opec to grow by 1.4 million barrels a day (b/d) in 2011, following an increase of 2.1 million b/d last year. In 2011, the demand for Opec crude is expected to average 29.9 million b/d, up from 29.5 million b/d in 2010.

But “the Japanese earthquake, along with economic uncertainty in the US is keeping oil demand estimates in an adjustment mode and is imposing a downside risk for the year’s forecasts”, Opec said in its May oil report.