OPEC: Cutting Oil Production Or Not?
The Organization of Petroleum Exporting Countries (OPEC) meets tomorrow in Abuja, Nigeria. The cartel is sending mixed signals about its next move. Some ministers are pushing for an additional cut on top of the 1.2 million-barrel reduction made back in October. But still other ministers are urging moderation. Mark Haines had two energy analysts on “Squawk on the Street” this morning to get their predictions for the oil market going into 2007.
Jan Stuart of UBS is betting on an additional cut of 500,000 barrels when OPEC meets tomorrow. The group, whose most influential members are Saudi Arabia and Iran--is still trying to find a balance between supply and demand. Stuart says OPEC’s job should be done by the second quarter, though.
Stuart says the U.S. economy will get the soft landing it needs, and energy should “perk up.” When supplies tighten up by summer, he predicts, there should be “huge upside risk” in oil. The average price of oil for 2007: $69 per barrel.
David Kirsch of PFC Energy doesn’t think the markets will see another call for reduction until January or February – but he agrees the next cut will be for 500,000 barrels. Once OPEC gets 80% compliance on its cuts, there will be “a manageable market for 2007.” He expects drops in Q1 and a build in Q2.