Market tense as OPEC prepares to convene

06 December 2004
As oil prices continued to hover close to $50 a barrel in early December, OPEC members gave conflicting signals about the likely outcome of a planned meeting of the organisation on 10 December. Saudi Arabia continued to emphasise its role as a swing producer. 'This year we increased our total production capacity from 10.5 to 11.5 million barrels a day [b/d],' Petroleum & Mineral Resources Minister Ali Naimi told delegates at a conference on 30 November. 'We have also recently developed plans to increase Saudi Arabia's sustainable production capacity to 12.5 million b/d over the next few years.'

The statement is unlikely to make much of a dent in prices. Crude oil futures eased slightly on 29 November but continued to hover around $49 a barrel in trading on the New York Mercantile Exchange, amid persistent concerns about shortages of heating oil at the outset of winter in the northern hemisphere. In London, Brent crude continued to climb, reaching $44.97 at the close of trading on29 November, despite the release of weekly US inventory data which shows a build-up in both crude and distillate stocks (see Special Report, pages 29-33).

The market will likely remain jittery in the run-up to the OPEC meeting, after both Iran and Venezuela indicated they were considering trimming record output levels, pumping close to 30 million b/d in early December. 'I say we in OPEC have to go back to our quota first, because the market has 2 million b/d of over-supply,' Iranian OPEC governor Hossein Kazempour Ardebili said on 29 November.

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