OPEC Reluctant to Add Oil Output as Prices Ease

OPEC oil producers may decide not to raise supplies after a fall in crude prices from record highs, ministers from the cartel said on Monday.

Oil Pump
Oil Pump

Oil's slide below $88 a barrel for U.S. crude from above $99 on Nov. 21 has made the Organization of the Petroleum Exporting Countries reluctant to support the small supply increment that many oil traders only last week were expecting.

"I believe the market is adequately supplied. There is no shortage," said OPEC President Mohammed al-Hamli ahead of Wednesday's meeting.

Qatar Oil Minister Abdullah al-Attiyah said it was "unlikely" OPEC would alter output, al-Hayat newspaper reported.

While some in OPEC worry that prices are still too high for a slowing oil-import dependent U.S. economy, none believe that a shortage of OPEC oil is to blame.

Having decided to lift output when it last met in September, volumes shipped from its big Middle East producers are now rising, with shipping brokers saying more is booked to sail this month.

When oil was valued in the high $90s per barrel it looked politically expedient for OPEC to agree another token output increase. Now prices have fallen that may no longer be necessary.

"There is absolutely ample supply," powerful Saudi Oil Minister Ali al-Naimi said last Friday. "The price movement has nothing to do with the fundamentals of the market."

"The price collapse of last week could be seen as a lesser incentive for Saudi Arabia to sponsor a new increase," said Olivier Jakob of oil consultancy Petromatrix.

Consuming nations argue that September's OPEC agreement to lift output needs topping up to rebuild stockpiles during the northern hemisphere winter.

But OPEC will also look at the factors outside its control that helped drive oil close to $100 a barrel, some of which are now not as supportive.

The decline in the value of the U.S. dollar has been a leading factor for oil market investors this year, making dollar-denominated crude's price rise less painful for non-dollar economies.

Oil's $11 fall over the past two weeks mirrors a recovery in the dollar against the euro which has seen the U.S. currency improve from a record low of $1.50 per euro to $1.46 on Monday.

Prospects for U.S. economic growth, still a leading factor for world oil demand, get grimmer by the month -- private economists Blue Chip put the odds of a U.S. recession at about one in three.

"We believe they are unlikely to do anything," said Mike Wittner, global head of oil research at Societe Generale. "They have the same concerns as the market -- the possibility of weakening economic growth led by the United States.