The Organization of Petroleum Exporting Countries (OPEC) will probably leave its production quota unchanged at this week's meeting in Iran, while also seeking to keep the price of a barrel of oil at near record levels, analysts say.
As demand for crude shows no signs of weakening, OPEC president Sheikh Ahmad Fahd al-Sabah said on Saturday the cartel would likely maintain the current output ceiling of 27 million barrels per day.
The International Energy Agency on Friday acknowledged the increase in global oil demand, raising its estimate for this year by 330,000 barrels per day to 84.3 million. It cited cold weather in the Northern Hemisphere, expected robust growth in the US and consumption in China.
OPEC, which alone supplies 40 percent of the world's oil production, will meet on Wednesday in the Iranian city of Isfahan, its first meeting in Iran since 1971. It comes at a time of heightened tensions between Iran and the West over Tehran's nuclear activities.
With the oil market jittery, the 11-nation cartel will "study the market situation with the aim to stabilize prices and market supply," said Sheikh Ahmad, who is also Kuwait's energy minister.
Chakib Khalil, Algeria's minister for energy and mines, said that OPEC has reached its production limit, and trying to stretch output by one million barrels per day isn't likely to lower oil prices.
Meanwhile, Venezuela's oil minister Rafael Ramirez said on Saturday that world oil prices will probably remain at their current levels for some time, so oil-producing countries shouldn't alter production.
But analysts ask if OPEC will do enough in the face of the anticipated demand. The economic growth expected in the US along with the continued high demand from China, northern Europe, India and Brazil, has raised concerns about supplies.
"If the market would be well supplied, I think prices would be lower," said Adam Sieminski, an analyst at Deutsche Bank.
OPEC should increase production but "there is a difference between what they should do and what they will do," he said.
"The supply-demand model suggests that the market is well supplied, but the markets themselves and the prices are telling it differently," he said.
On Wednesday in London, Brent North Sea crude oil for delivery in April rocketed to US$54.05 a barrel -- exceeding the previous record of US$53.36. It closed the week at US$53.10.
New York's main contract, light sweet crude for delivery in April, climbed to US$54.43 a barrel in closing deals.
Analysts speculate prices could spiral, perhaps reaching as high as US$100 a barrel.
Frederic Lasserre, an analyst at Societe Generale, says US President George W. Bush's policy in the Middle East could cause a bounce in prices.
"Some believe, perhaps, that the United States is ready to launch air strikes to interrupt Iran's nuclear program," he said. In that scenario, and along with "the already high degree of tension in the oil market, it is entirely plausible that prices could rise by US$20 a barrel."
OPEC meanwhile has signalled that it's not interested in lower prices.
"We are satisfied with the current level of prices and we don't think we need to return to a level of US$25 a barrel," Iran's representative to OPEC, Hossein Kazempour Ardebili, said after a meeting on Thursday.
At OPEC's last meeting on Jan. 30, the cartel suspended its price band of between US$22 and US$28 a barrel, calling it "unrealistic." Analysts do not expect any changes after the cartel looks at the results of an in-depth study on the subject at its talks in Iran this week.
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