Mr Rafael Ramirez oil minister of Venezuela said that “We think that given the economic situation, above all in Europe, there is a serious threat that prices might fall drastically and so our policy is to defend the production ceiling agreed in December of 30 million barrels a day.”
Mr Abdulrahman Ben Yazza oil minister of Libya said that “I am afraid of this fall anything below USD 100 is very painful for Libya. Brent crude traded at just over USD 97 per barrel on Wednesday having peaked this year at USD 128 in March.
Mr Ali Al Naimi oil minister of Saudi Arabia said that a moderate on oil prices initially floated a proposal to lift Opec’s output target. After Saudi Arabia quickly dropped that idea, the 12 member group looks set at a Thursday meeting to leave its formal production ceiling unchanged at 30 million barrels daily. But extra oil from Saudi boosted actual output to 31.6 million barrels per day in May, a production rate in excess of demand that is building world inventories rapidly.
Mr David Hufton of London oil brokers PVM said that a report from OPEC estimated inventories rose by 2.1 million barrels per day on average in the Q1 of the year during a seasonal period when stocks normally decline. Supply and demand data suggests a build on a similar scale in the Q2. In the face of such gloomy uncertainty OPEC should be discussing production restraint on Thursday.
Saudi Arabia finds itself in the tricky position of trying to plan cover for supplies lost from Iran when an European Union oil embargo starts on July 1st 2012 without sending prices crashing. Its preferred oil price is USD 100 per barrel, a price it feels permits oil investment without hurting economic growth, while most in OPEC want to defend USD 100 as a price floor.
Extra Saudi supply, taking Riyadh to 30 year high of 10 million barrels per day has helped build oil stocks around the world. In the United States, where Saudi crude imports have risen sharply this year after years of decline, crude stocks are at their highest since 1990.
The stock cover will provide insurance against further the output losses from Iran, where the International Energy Agency estimates exports are already down 40%, 1 million barrels daily to 1.5 million barrels per day since the end of last year.
Asian importers of Iranian crude had been hoping that part of the EU embargo on Iran, on shipping insurance, might be delayed or cancelled to permit them to continue taking out UK indemnity to cover Iranian oil shipments.
Mr Guenther Oettinger EU Energy Commissioner said that the embargo would proceed as planned. Those in OPEC who fear a price slide can cite the group’s own in house analysis from its Vienna secretariat which suggest prospects for oil demand are darkening.
The secretariat said that from the Euro-zone crisis to a notable deceleration in the developing and emerging economies, the current challenges are manifold. The H2 of the year could see a further easing in fundamentals despite seasonally higher demand.
