OPEC faces difficult balancing act
VIENNA. June 13. KAZINFORM It is shaping up to be an intriguing two days in Vienna. Ministers with some of the largest oil reserves in the world will gather Thursday to determine if the more than $25 slide in global energy prices requires urgent action. Ahead of the ministerial meeting, they will meet with their counterparts from the private sector and air their views at the OPEC seminar Wednesday at the Hofburg Palace, before an audience of 1,200 energy executives, according to CNN.
Uprisings throughout North Africa - which shut down 90% of Libya's oil production for months - military exercises in the Strait of Hormuz, and rising demand from China kept markets on edge and drove prices higher last year and through the first quarter of 2012.
But those fears have been trumped by a euro crisis in Greece and Spain that is sapping demand not only in Europe but also in the major emerging markets.
In just two months, the tide has turned on prices and the dozen members of the group may have difficulty trying to reverse the downward momentum.
"You don't want to be defending an oil price when it's falling," said Sean Evers, CEO of Gulf Intelligence, "You want to put the fences up first before that happens. I think in this instance, it's possibly too late for OPEC to try and defend $100 a barrel."
It sets the stage in Vienna for a classic OPEC tug of war. On one side the price hawks like Iran and Venezuela, who want to maximize revenues, versus those known as the doves, led by Saudi Arabia and the UAE, that don't want to kill off an economic recovery with high oil prices.
Ahead of the meeting both Iran and Venezuela, while avoiding Saudi Arabia directly, said the production agreement set back in December of 30 million barrels a day should be adhered to. Official figures from the International Energy Forum in Riyadh suggest they are at least one and a half million barrels above that target.
Those comments were quickly followed up by the kingdom's long-serving oil minister Ali Al Naimi who told the Gulf Oil Review this week: "Our analysis suggest that we will need a higher ceiling than currently exists."
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