OPEC waits for better times

Analysts said OPEC's abstention from changes in crude output is due to unwillingness of a further sharp rise in oil prices, which can lead to a further drop in demand. "And this, in turn, will reduce the profit of the cartel," Analyst for Energy policy at the American Strategic Institute Cascade, Todd Wynn said.

According to the U.S. State Energy Information Agency (EIA), OPEC's revenues from oil exports in January-August amounted to $340 billion. The EIA estmated that OPEC's revenues in 2009 will amount to $559 billion compared to $971 million in 2008 due to the sharp decline in oil prices as a result of the global financial crisis.

According to the representative of the cartel, at present oil prices are within quite acceptable levels for both producers and consumers.

"As long as oil prices remain within the $60-$70 per barrel price level OPEC member states will not adopt any decisions with regards to their oil output," Expert at the Oxford Institute for Energy Research Shamil Yenikeyeff said.


On the other hand, according to the analysts, OPEC's decision to not leave output quota unchanged is caused by overproduction in some countries.

At present, the current level of oil output in 11 OPEC-countries (except Iraq) is 24.85 million barrels per day.

Since the onset of global financial crisis, OPEC has thrice cut the quota for oil production. The last time, the cartel reduced quotas on oil production in December last year. Totally, general volume of production has decreased by 4.2 million barrels per day since September last year.

Nevertheless, reductions by OPEC were achieved by only 70 percent. In July, real oil output in 11 OPEC countries exceeded the officially fixed rate and amounted to more than 26 million barrels per day, the EIA said.

Under the EIA estimations, OPEC oil production amounted to 28.7 million barrels per day in the second quarter of this year. The EIA believes that the oil output by the cartel will increase by late 2009 and it will not drop, until oil prices fall sharply.

The analysts said it would not be difficult for the OPEC countries, where oil reserves hit the current production levels, to increase volumes of supply and so, the cartel will take a "wait and see" policy.

"OPEC will adopt a sort of "wait and see" approach, which is the only rational one in a very uncertain time," the Energy Department Director at the Italian Liberal Research Center Bruno Leoni Carlo Stagnaro said.

The next OPEC meeting will be held in Angola on Dec. 22. According to many forecasts, oil demand will stabilize by this time, thereby increasing the probability of falling oil prices. Accordingly, at that time OPEC will have something to think about.

"If oil prices on the world markets drop sharply, the cartel may think of cutting production quotas as early as December this year," said analysts one of the world's largest banks - U.S. JPMorgan.

Trend Capital commentator Aygun Badalova