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Commentary: OPEC Sitting Pretty, But Are Storm Clouds Brewing?

Roger Milley | Vetta | Getty Images

I'm not going to make a mountain out of a mole hill, or should it be a gusher out of a trickle? Anyway, aside from mixed metaphors the fact is: this should be a very straight forward OPEC meeting in Vienna.

Oil prices are where the group, which produces circa 40 percent of global oil output, want them. The OPEC basket is currently trading at around $106 per barrel. This is enough to keep the petro-dollars flowing and, more importantly, pay for spending programs to keep domestic populations happy for now.

In addition, OPEC has successfully filled in the export gap left by Iran's sanctions and is, as per usual, happily pumping pretty much as much oil as it can. Fears of a euro zone collapse and/or a hard landing in China have, as of yet, failed to materialize and have a meaningful effect on global oil demand. Despite everything that is being thrown at the global economy, the planet is still consuming around 90 million barrels of oil per day in 2012, slightly more than we did a year earlier.

So, with all that going in OPEC's favor, why is the meeting in Vienna going to be a potentially moody affair? Is the apparent lack of downside risk in the oil price disguising longer term economic and political problems ahead?

Here are four reasons why things might not be as relaxed as they look:

1) Oil prices are now above $100 per barrel and OPEC is producing more than a million barrels a day over what it thinks will be needed from the group in 2013. This is leading to above average inventory build in the consuming nations. So how much oil needs to be added to the inventories before this has a downward drag on price? Let's face it, discipline and OPEC production have never gone hand in hand. Even if Saudi does respond and takes some supply off the table, who's to say some non-OPEC player might add to the glut?

2) The U.S. fiscal cliff is looming. If we go over the cliff, there will be a real fear that the U.S. economy will take a severe hit and take with it the oil price. Risks assets, pumped up by QE (quantitative easing) could also fall as the long financial investors dump long positions. Don't forget a lot of national oil companies and their supporting governments need $100 to support national budgets. Below that, domestic social problems may flare up dangerously. Even if global demand holds up, who's to say the 'speculator premium' in the oil price won't come out of it and takes us towards $80 per barrel or lower?,

3) Non-OPEC supply from the likes of Canada and U.S. is growing significantly. In the United States, according to the EIA, crude production was 6.5 million barrels per day in September 2012, the highest volume in nearly 15 years. The IEA reckons self-sufficiency is on the cards by 2035. Along the way, possibly within five years, the USA is set to overtake Saudi Arabia as the world's top oil producer. It's not only North America that is looking at shale and alternatives. OPEC is nervously watching the Chinese and Europeans' attitude to shale and the like.

4) The OPEC secretary general Abdalla Salem El-Badri is set to retire as Secretary General of OPEC after five years in the job. His replacement is politically explosive as both Iran and Saudi Arabia want their man to replace the Libyan incumbent. This disagreement is part of the wider Iran/Saudi row which is engulfing the Middle East.

By Steve Sedgwick, Anchor, CNBC "Squawk Box"

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