OPEC still on course to meet market challenge

LONDON – A US$10-a-barrel price slide, an unseasonable rise in motor fuel stocks and a slackening of output discipline have complicated, but not yet sabotaged, Opec’s quest to push the oil market higher.

At its last meeting in May, the Organisation of the Petroleum Exporting Countries was in upbeat mood and the US$75-a-barrel level its members have argued is a fair price for consumers and producers emerged as a goal for later this year.It was very nearly achieved at the end of June when oil hit this year’s peak of US$73,38. But since July a different mood has swept financial markets, which are now as focused on economic gloom as on embryonic growth.’Yes, we are concerned,’ a source close to the Angolan Opec presidency said. ‘But we cannot panic. We have to wait until the meeting in September.’Opec next meets to consider output policy on September 9.’I doubt Opec will do anything with things as they are. I think they will emphasise compliance,’ one Opec delegate said.’Prices are weak because of views on the economy. People that were optimistic are now pessimistic. This is apart from fundamentals, which are still weak.’COMPLIANCE EASESSince September last year, Opec has pledged to remove 4,2 million barrels per day (bpd) from its production, about five per cent of world demand, and by March was delivering around 80 per cent of the promised curbs.Regarded as a record level of discipline, it was highly successful in boosting prices from last December’s low of US$32,40 and many predicted supply and demand would return to balance late this year.They take a different view now Opec’s output discipline has dropped to roughly 70 per cent and sluggish US demand, even at the height of the summer driving season, has allowed inventories to swell.Expressed as days of forward demand – a measure closely watched by Opec – stocks in developed countries totalled 62,5 days at the end of May, the International Energy Agency said last week.That compared with 62 days at the end of April and is around 10 days more than Opec considers comfortable.’Stocks will probably come down to normal levels some time in the first quarter (of 2010)’ said David Kirsch, director of market intelligence services at PFC Energy in Washington.’About two months ago, we thought probably some time in the fourth quarter.’-Nampa-Reuters