Somewhat unsurprisingly, the market monitoring committee of the Opec oil cartel has recommended the group keep its quotas where they are.
Opec ministers meeting in Vienna today after sundown can take that guidance or leave it.
The majority of ministers, analysts, reports and hangers-on crowding the Vienna hotels at which the delegates are staying believe Opec will maintain the status quo. After all, oil prices are at around $70 – right where Opec wants them.
At most, they believe, Opec will call for members to stop cheating. Kuwait, which sits on the MMC and has enacted its entire share of the cuts, last night said it would like to see compliance rise to 74 per cent from around 68 per cent today.
But there is one lone voice suggesting Opec knows the market is oversupplied, inventories are high and that the group will have to do something about it.
Almost like Jiminy Cricket to Pinocchio, analysts at PFC Energy, the industry consultants, warn onlookers not to jump to a decision too hastily.
Wise traders should take this into account, as it was PFC who last year correctly predicted Opec’s 500,000 barrel a day cut when everyone was certain nothing was going to happen.
This time, they are not making an explicit call. All they will say this time is that Opec knows it will have to take some barrels out of the market, somehow, in the not-too-distant future. It is a caution that by no means are they saying a cut is definitely in the cards.
Related links:
From Opec: the power of Saudi Arabia (FT Energy Source, 08/09/09)
A less exciting Opec meeting (FT Energy Source, 08/09/09)
Analysts expect Opec rollover (FT Energy Source, 07/09/09)
