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OPEC Preview: Increase in Oil Production Unlikely, Market Observers Say

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OPEC Preview: Increase in Oil Production

Unlikely, Market Observers Say

(18:4601/31/08) (CEP News) Vienna - An announcement from the Organization of the Petroleum Exporting Countries about an increase in oil production at its 147th Extraordinary General meeting on Friday is highly unlikely, according to market observers.

Ahead of the meeting, oil ministers from OPEC member nations have already been hinting about keeping the group's output target unchanged at 29.67 million barrels a day, as they started arriving in the Austrian capital. Speaking to the press on Thursday, Kuwait's acting oil minister Mohammed AI-Aleem said, "We are a little worried about the impact of a slowdown or a recession in the United States on oil prices. The price, for the time being, has been gOing a little bit down." "Within three weeks, it's been about 10 dollars. We have to see why, what the problem is, and whether it's going to continue at the same pace," AI-Aleem added. On his arrival in Vienna, Qatar's Minister of Energy and Industry, Abdullah bin Hamad AI Attiyah, said, "We have no option now but to hold our output target of 29.67 million oil barrels. We are very concerned about the world economy. The U.S. economy will influence oil prices." Meanwhile, according to local media reports, current OPEC President and Algeria's Energy Minister Chakib Khelil is thought to be sitting on the fence on the decision to cut or hike production. Meanwhile, Venezuela's Minister of Energy and Petroleum, Rafael Ramirez, said he would call for a cut in output should prices continue to fall, according to Spanish media. Analyst Stephen Schork, principal author of The Schork Report, who is in Vienna to monitor the developments at OPEC, said political rhetoric aside, the recent string of news makes it all the more difficult for OPEC to announce a production increase. "U.S. downstream capacity has now plunged 635 basis points since the start of the year. We are seeing an early and potentially prolonged turnaround season. Combined with the growing perception - buttressed by Wednesday's GDP number - that the U.S. is now in a recession, it will make it difficult for OPEC to formally announce an increase tomorrow," Schork said. Kevin Norrish, Commodities Researcher at Barclays Capital said, "The markets (and ourselves) are widely anticipating a rollover in current production quotas. While oil market fundamentals are still tight, we expect OPECto maintain a defensive policy in the face of the increasing macroeconomic gloom." He added there is nothing in the recent oil data flow yet to get OPEC in the mood to produce more. "As for the US weekly data, there is a certain sense of deja vu in that several components behaved just as they did in the previous week. Gasoline inventories are still tracking last year's pattern almost perfectly, as are refinery runs of crude," Norrish said. "However, at 85%, refinery utilization has reached the lowest level seen since November 2005 during the rebound in activity after the hurricanes. "Overall, oil product inventories built slightly less than the five-year average, while crude inventories built by more, producing a slight overall slackening in the total inventory position," he continued. "Gasoline demand growth for the month-to-date remains stronger than in any month in 2007, while distillate demand remains flat relative to last year's muted levels." Ed Morse, chief energy economist at Lehman Brothers, said OPEC's policies ensure oil price volatility. "OPEC officials meeting this week in Vienna blame speculators for most of this volatility. But, growing price volatility stems directly from OPEC'S increased importance in balancing markets. Speculative flows accentuate price movements, but the producer group is their prime cause," Morse wrote in the UK's Financial Times newspaper. "Three factors reinforce OPEC's role in price volatility. The first stems from OPEC's increased internal factionalism and the polltics of consensual decision-making. The second reflects OPEC's greater prominence in incremental global oil supply. Jhe third is OPEC's own demand growth where summer consumption undermines oil production schedules, tightening markets just as demand seasonally peaks elsewhere," he

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OPEC Preview: Increase in Oil Production Unlikely, Market Observers Say

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added. OPEC, which is headquartered in Vienna, accounts for more than 40% of the world's total oil supply and is comprised of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Among the members, Iraq is the only country without a production quota at present due to the ongoing political unrest. Analysts are expecting OPEC to announce a hold in oil production at 29.67 million barrels at the end of the Friday meeting. A decision is expected in the latter half of the day. By Gaurav Sharma, gsharma@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

(END) ©CEP Newswires - ©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca

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04/02/2008

Oil Dips Lower as Market Convinced OPEC Would Refuse to Raise Output

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Oil Dips Lower as Market Convinced OPEC Would Refuse to Raise Output
(05:45 02/01/08) (CEP News) Vienna - Oil prices dipped in markets on both sides of the Atlantic as speculators have almost factored in the expectation that OPEC will refuse to raise output at its extraordinary general meeting on Friday, especially amid ongoing worries about a U.S. economic slowdown which could potentially hit demand. At 4:32 a.m. EST on Friday, London Brent crude for March delivery was down 37 cents at $91.79 per barrel while New York's WTI crude for March delivery was down 43 cents at $91.31 per barrel. Market consensus and rhetoric from OPEC ministers suggests that the group is going to do nothing at its meeting. Commenting on the Friday morning prices, analyst Stephen Schork, principal author of The Schork Report, said, "On Wednesday the U.S. government reported that net stocks of crude oil jumped by 3.56 MMbbls or 1.2 % as downstream capacity plunged for a third straight week." "As a result, refinery demand dropped to a 47-week low, 14.62 MMbbl/d. Thus, with demand for crude oil drying up and the prospects of a U.S. recession growing, the odds are rather long OPEC will formalize any sort of increase in Friday's meeting," he concluded. Jacob V. Jensen, Commodities Trader at Jyske Bank also expects OPEC to keep production unchanged despite pressure from the U.S. for opening the taps more. "OPEC has long expressed concern that the problems of the US economy are denting demand, resulting in falling prices, and the OPEC members are not expected to be willing to further the correction by sending more oil to market," he said. "Instead, OPEC is expected to postpone an increase in production until the official meeting on Mar 5 when a clearer picture of the situation will be available. In our opinion, the arrow for the short term in the oil market is still down towards a possible test of $88 a barrel. However, prices will be affected by the sentiment in the financial markets; the equity market in particular," Jensen concluded. Commodities researchers at Barclays Capital also told CEP News that they expect no movement from OPEC on the production front. The group, which is headquartered in Vienna, accounts for over 40% of the world's total oil supply, comprising of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Among the members, Iraq is the only country without a production quota at the present time due to the ongoing political unrest. Analysts are expecting OPEC to announce a hold in oil production Friday's meeting, which is currently ongoing. By Gaurav Sharma, gsharma@economicnews.ca, at 29.67 million barrels at the end of

edited by Nancy Girgis, ngirgis@economicnews.ca

(END) ©CEP Newswires - ©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca

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04/02/2008

OPEC Says Oil Production 'Sufficient' to Meet Global Demand Over Ql 2008

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OPEC Says Oil Production

'Sufficient'

to Meet Global Demand Over Q1 2008

(07:51 02101/08) (CEP News) Vienna - OPEC member nations decided that oil production was sufficient to meet the expected global demand for the first quarter of 2008 and therefore decided to hold production at 29.67 million barrels at their 147th extraordinary general meeting on Friday.

Speaking to the press after the decision, Dr. Chakib Khelll, President of the conference and Minister of Energy and Mines of Algeria said, "We are determined to take every measure necessary to keep the market stable and at the present moment in time we feel that OPEC and non-OPEC production is sufficient to meet existing demand." "However, OPEC members have noted the significant uncertainties associated with the projected downturn in the global economy. This calls for vigilant attention on their impact on key market fundamentals until our next meeting on March 5," he added. OPEC secretary-general Abdalla Salem EI-Badri said that production decisions had ensured that the market remained well-supplied throughout 2007. "The first half of 2008 is likely to witness a crude inventory buildup. Oil stocks are at their five-year average, with output likely to increase by 100,000 barrels per day over the first quarter of 2008." "It is in OPEC's interests to maintain a healthy supply of oil. Everyone talks about a $100 per barrel price, but we don't. There could well be concerns about refinery capacity but there should be no doubt about supply. No drastic measures are needed to prop it up," he concluded. OPEC members also felt that a U.S. slowdown will not necessarily curb the appetite of the burgeoning economies of China and India for oil. However, the oil producing lobby group refused to be drawn into the speculation about whether the U.S. faced a recession or not. "We are not an economic forecasting group. We rely on economists' input, many of whom are not convinced that the U.S. faces a recession. We are monitoring the situation with the sole purpose in mind that our job is to ensure adequate supplies of oil," Khelil said. By Gaurav Sharma, gsharma@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca

(END) ©CEP Newswires - ©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca

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04/02/2008

OPEC's Cautious Stand Could be Tested by Global Slowdown, Say Market Observers

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OPEC's Cautious Stand Could be Tested by Global Slowdown, Say Market Observers
(10:02 02/01/08) (CEP News) Vienna - OPEC's cautious stand on oil production output is likely to be severely tested over the course of 2008 as global economies confront a slowdown, according to market observers.

Earlier on Friday, OPEC member nations decided that oil production was sufficient to meet expected global demand for the first quarter of 2008 and therefore decided to hold production at 29.67 million barrels at their 147th extraordinary general meeting. The decision was in line with market expectations. Speaking to the press after the decision, Dr Chakib Khelil, President of the conference and Minister of Energy and Mines of Algeria said, "We are determined to take every measure necessary to keep the market stable and at the present moment in time we feel the OPECand non-OPEC production was sufficient to meet existing demand. "However, OPEC members have noted the significant uncertainties associated with the projected downturn in the global economy," he added. "This calls for vigilant attention to their impact on key market fundamentals until our next meeting on March 5." OPEC secretary general Abdalla Salem EI-Badri said, "Production decisions had ensured that the market remained well supplied throughout 2007. The first half of 2008 is likely to witness a crude inventory build-up. Oil stocks are at their five year average, with output likely to increase by 100,000 barrels per day over the first quarter of 2008." He noted it is in OPEC's interests to maintain a healthy supply of oil. "Everyone talks about a $100 per barrel price, we don't," he said. "There could be concerns about refinery capacity but there should be no doubt about supply. No drastic measures are needed to prop it up.
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OPEC members also felt that a U.S. slowdown will not necessarily curb the appetite of the burgeoning economies of China and India for oil. However, the oil producing lobby group refused to be drawn into the speculation of whether the U.S. faced a recession or not. "We are not an economic forecasting group. We rely on economists' input, many of whom are not convinced that the U.S. faces a recession. We are monitoring the situation with the sole purpose in mind that our job is to ensure adequate supplies of oil," said OPEC's Khelil. Sooner rather than later, the global economy would in all likelihood dominate OPEC meetings in 2008, according to observers. Kevrn Norrish, Commodities Researcher at Barclays Capital, said the latest data flow has not been such to get OPEC in the mood to produce more. "The U.S. weekly oil statistics so far this year have been somewhat softer, suggesting a pause in the sharp tightening process in crude oil inventories, witnessed over the previous six months. This, alongside nervousness over the impeding seasonal demand slowdown, has fed perception among OPEC members that the market is well supplied at present," Norrish said. "OPEC's conduct also reflects its preference for a cautious output policy, where keeping the downside limited is seen as the main objective. With our base-case scenario calling for the oil market to stay in deficit, we see OPEC'S behaviour as a key source of upside price risk, particularly moving into the second half of the year," he concluded. Tony Shepard, an oil stocks analyst at Charles Stanley, said the "commodity price bubble" could be punctured by a possible U.S. recession. "Certainly, there could be some short-term oil price weakness if a recession occurs but this threat appears to be receding with every U.S. interest rate cut," he said. "With structural oil supply issues unresolved, oil prices look well supported but there is a risk that market oil price assumptions are high as brokers have upgraded long-term oil price forecasts to say $85 per barrel from $65 per barrel." Howard Archer, Chief UK Economist at Global Insiqht, said, "Clearly, persistent very high oil prices are a major concern for the UK and European economies, adding yet one more headwind for the economies to face. High oil prices are pushing up energy bills and fuel prices, thereby eating into the purchasing power of consumers.

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OPEC·s Cautious Stand Could be Tested by Global Slowdown, Say Market Observers

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"Central banks such as the ECB and Bank of England are clearly concerned that persistently high oil prices will push up inflation expectations and lead to significant second round inflationary effects. This is limiting their room for manoeuvre on monetary policy," he added. The big question is to what extent OPEC is prepared to come to terms with a perceived global economic slowdown and what would its reaction be. Local rumours suggest the two OPEC member governments of Venezuela and Iran have called for a cut at its next meeting on March 5. Both declined comment when contacted by CEP News. However, the call for a cut, according to analysts, could be substantiated by both countries (and others) in March on the basis that cutting crude output would partially offset a lower demand in the wake of a global economic downturn, whether or not it takes the shape of a recession. Following the OPEC meeting, at 8:15 a.m. EST on Friday, London Brent crude for March Delivery was down 4 cents at $92.16 per barrel, while New York's WTI crude for the same delivery period was up 3 cents at 91.78 per barrel. By Gaurav Sharma, gsharma@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

(END) ©CEP Newswires - ©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca

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