VIENNA // The minister of energy, Mohammed bin Dha'en al Hamli, expressed satisfaction at the recent 30 per cent decline in oil prices, and indicated that Opec is keeping the market well supplied with oil on the eve of the organisation's meeting. The tone of Mr Hamli's remarks contrasted sharply with statements from Iran and Venezuela - Opec's traditional price hawks - that argued prices should not be allowed to fall below three digits and that Opec should reduce its output of oil. Prices stood at US$108.04 a barrel yesterday, from a record above $147 reached in July.
"The recent decline in prices simply shows that the oil price had risen too high and too fast," Mr Hamli told WAM, the state news agency. "Commercial crude oil stock levels in OECD countries are within the five-year average level which indicates that the market is well supplied," he added, in reference to the Organisation for Economic Co-operation and Development, which includes most industrialised nations.
Mr Hamli's remarks added to the momentum building against a change in Opec output. Talking to reporters in Kuwait before leaving for Vienna yesterday, the Kuwaiti oil minister, Mohammad Olaim, said: "We don't think there is a requirement to decrease production." The Ecuadorean minister was more adamant. "I don't believe there is any possibility we will change production levels," Galo Chiriboga said. "Production is adequate... the market is not oversupplied, it is adequately supplied."
A poll conducted by Bloomberg found that 29 of 32 oil analysts did not expect Opec to change output. The most important voice in the organisation, that of Ali al Naimi, the Saudi oil minister, has been conspicuously absent in the days leading up to today's meeting. He was not expected to arrive in Vienna until the early hours of today. As oil prices reached a record in July, Saudi Arabia increased production by more than 500,000 barrels per day (bpd), leaving it 700,000 bpd above its agreed target level.
Opec price hawks, including Iran and Venezuela, have argued there is an excess of oil on the market, and that all producing countries should return to their quotas to keep prices above $100 a barrel. The Iranians continued their call for an output cut yesterday. "Of course, of course I believe that the market is oversupplied," Iranian oil minister Gholamhossein Nozari told reporters in Vienna. On Sunday, Libya's top oil official, Shokri Ghanem, gave his weight to the Iranian argument as he prepared to depart for the meeting. "There is now oversupply and that will lead to a stock build-up," he told Reuters. "If the market is in oversupply, then it is better for everybody to have a balanced market, which means sticking to the quotas."
Shortly before oil prices hit their July record of $147.27, Saudi Arabia called an emergency energy meeting in Jeddah and pledged to pump 9.7 million bpd, taking output to the fastest rate since 1981. But demand in the US, the top oil consumer, fell at the fastest rate since 1982 in the first half of this year, raising the prospect of a build-up in stocks. Opec as a group last agreed to an official change a year ago in Vienna, when it decided on a modest increase of 500,000 bpd.
The price of oil was then less than $80 a barrel, compared with average prices this year of above $100. Their strength has been one of the top issues in the US election campaign and made it politically difficult for Opec to publicly revise its targets. "We have a neutral view on that [Opec] meeting, with a bias that it will end up in supportive words rather than supportive action," analyst Olivier Jakob, of Petromatrix, wrote in a note.
"[Hurricane] Ike is... complicating things a little bit, as it is not the best timing to announce a reduction in output while destructive potential still looms in the US Gulf [of Mexico]." * With Agencies cstanton@thenational.ae
