Despite soaring gasoline prices in the US and high oil prices worldwide, OPEC may hold firm on a 1 million-barrel per day (bpd) production cut for Thursday when it meets in Vienna on Wednesday, analysts said.
But OPEC has surprised the market in recent months and oil prices were vacillating at the end of the week after news of a surge in US crude oil inventories and signs the organization might in fact delay the planned output cut.
Still, oil analyst Bruce Evers said: "My best guess is they will cut. They can't afford to be reactive, they have to be proactive," in dealing with a predicted fall in demand for oil as spring arrives in the northern hemisphere.
Speaking by telephone from London, Evers said that if OPEC changes its mind, after announcing a cut last month in its production quota from 24.5 million bpd to 23.5 million bpd as of Thursday, then "some very long positions [in the oil market] could be unwound rapidly.
"This would cause a reaction in price that OPEC would have a hard time turning around," he said.
Adam Sieminski from Deutsche Bank in London said OPEC would go ahead with the cut but "not reduce production unless prices fall below US$30."
In London on Friday, the price of benchmark Brent North Sea crude oil for May delivery rose two cents per barrel to US$31.85 in early deals.
Sieminski said OPEC would "in fact maintain the April cut because of the drop in demand that is still expected in the second quarter."
"In practice, they are just going to watch the price and keep producing. It doesn't matter what they say," Sieminski said.
OPEC had surprised oil markets on Feb. 10 by announcing in Algiers that it would be producing 2.5 million fewer barrels per day (bpd) of crude as of Thursday, including both trimming excess over the quota and the quota itself.
Traders had expected OPEC to wait until spring to announce any cuts as prices were still above OPEC's target band of US$22 to US$28 dollars a barrel and demand was still high owing to an exceptionally cold winter in the US and Europe.
But OPEC members said in Algiers that they were reducing the cartel's production quota by 1 million bpd and that production over this quota that had been stimulated by high demand was to be eliminated by the end of March, with the excess estimated at 1.5 million bpd.
OPEC's aggressive six-month-old strategy of cutting oil production is causing pain in the US.
The record-high price of gasoline has become an issue in political sparring between US President George W. Bush and the man who is to oppose him in elections next November, Senator John Kerry.
Some analysts think OPEC is making a mistake.
The cartel "is seeking to rein in supply at a time when oil demand growth is going through one of its rare periods of acceleration," said the London-based Center for Global Energy Studies (CGES) in its latest report.
"The organization's claims that it faces a repeat of the oil price crash of 1998 are unrealistic, since market conditions are very different from those six years ago," the center said.
CGES expert Manouchehr Takin said OPEC "partly justifies its decision to reduce quotas on the low value of the dollar."
OPEC says this is hitting revenues.
But "the impact of these two factors is not as big as all that," Takin said.
Experts said an unexpected boost in demand, particularly by China, which is now the world's second largest oil consumer behind the US, has taken the market by surprise.
Several analysts said OPEC was basing its estimates for demand on figures from the International Energy Agency (IEA) that were way too pessimistic.
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