VIENNA // Regional imbalances in the economic recovery, inadequate regulation of oil markets and competition from oil producers outside OPEC could threaten recent stability in oil markets, the group says. Oil prices may be holding at about US$75 a barrel, a level deemed appropriate by many exporting and importing nations, but OPEC's Vienna-based secretariat warned oil ministers not to drop their guard amid a multitude of risks.
"There are fears of double-dip recession," the secretariat said in a report for today's meeting of oil ministers in Vienna. The report noted a "growing imbalance" in economic expansion between industrialised and developing countries. "There is the gathering debate about the extent and timing of exit strategies from the stimulus packages imposed during the crisis," the report said. "And there is the realisation that overheating in some emerging economies may lead to tougher stands on expansionary policies."
Crude prices had lately "held up well", partly due to OPEC actions aimed at stabilising prices for the group's reference basket of crudes within a range of $70 to $80 per barrel, the secretariat said. Yesterday, it reported an average year-to-date price of exactly $75 per barrel for the OPEC crude basket, the price that King Abdullah of Saudi Arabia has identified as "fair" to the interests of producers and importers alike. The basket price stood at $76.24 on Monday.
Oil prices swung violently from a high of nearly $150 in July 2008 to below $35 in February last year, causing havoc with national budgets across OPEC, whose 12 members rely heavily on oil profits. Western regulators had concurred with OPEC that a lack of regulation of freewheeling global futures markets had contributed to the volatility, but little has changed on the ground. "There is still more talk than action about the introduction of effective regulatory measures in the financial sector," the OPEC secretariat said. "This is leaving oil, as well as other commodity sectors, exposed to new rounds of severe price volatility, which is detrimental to both the oil industry and the world economy at large. As we learnt two years ago, no party gains from this."
Signalling the likely outcome of today's ministerial meeting, the Saudi oil minister, Ali al Naimi, said on Monday there was no need for OPEC to change its production limits, in place since a drastic output cut in January last year. "We are extremely happy with the market. The economy is doing well; it will do better down the road, so I don't see any reason to disturb this happy situation," Mr al Naimi said in the Austrian capital.
Some other OPEC ministers have indicated concern about slipping compliance with the cuts. "The market is oversupplied," Libya's top oil official, Shokri Ghanem, said yesterday in Vienna. "We're going to call for compliance." tcarlisle@thenational.ae
