OPEC's credibility as a force with enough pull to bring down stubbornly high oil prices was on the line yesterday as oil ministers began arriving ahead of a key meeting in Vienna this week.
OPEC -- beset by prices hovering around US$55 a barrel -- is expected to raise its daily output ceiling by 500,000 barrels to an official quota of 28 million barrels per day when it meets tomorrow.
But key officials and industry analysts can't help but wonder: What's the point?
No change likely
OPEC, which churns out 40 percent of the world's daily crude production, is already pumping roughly 30 million barrels a day, meaning the move would be largely symbolic and unlikely to drive down prices that are bedeviling motorists at the gas pumps and putting the brakes on the global economy.
"No matter what the decision -- half a million [barrels], 1 million or 2 million a day -- it will have no physical impact on OPEC's output level. It will be just playing with numbers," Iranian Oil Minister Bijan Namdar Zanganeh said on Monday.
"This is a crazy market. I don't know what to make of it," said Libya's oil minister, Fathi bin Shatwan. "Raising the ceiling is OK, but really, most are producing at full capacity and cannot produce more."
Saudi Oil Minister Ali Naimi said yesterday he wants the 11-nation cartel to chew the price per barrel below US$50, a psychologically important threshold. Naimi said current crude prices "are high," and he'd prefer to seem them "below US$50 ... that is what is reasonable worldwide."
OPEC contends prices benefit it most when they're in the US$40 to US$50 range. The group obviously has no interest in seeing prices plummet, but also wants to keep buyers from turning to producers outside the cartel.
According to Mohammed bin Dhaen al-Hamili, the United Arab Emirates' oil minister, OPEC essentially has two options: Keep its current production ceiling at 27.5 million barrels a day, or increase it by an amount that will cool oil prices.
Supply not the issue
The law of supply and demand isn't the main factor driving up prices, al-Hamili contends, pointing to speculation in the future market, instability in some producing countries and concerns in world markets over insufficient production capacity.
"Market fundamentals clearly indicate without any doubt that supply in the world markets is more than demand," he said.
OPEC president Sheik Ahmad Fahad al-Ahmad al-Sabah said last week that the cartel would increase the ceiling by 500,000 barrels per day to show to consumers that it's doing its best to cool prices.
Saudi Arabia is the only known country in the group with the ability to add barrels to daily production. Naimi said recently that even if the group raises its production ceiling, it may not make much sense to actually add oil to the market.
"Any decision by OPEC to increase oil production at this week's meeting in Vienna can't be implemented," Zanganeh said.
"This will be simply a positive or negative gesture .... OPEC members won't reduce their production," Zanganeh said.
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