Thursday, June 09, 2011

Big Surprise: OPEC fail to raise output

Corruption is government intrusion into market efficiencies in the form of regulations. That's Milton Friedman. He got a goddamn Nobel Prize. We have laws against it precisely so we can get away with it. Corruption is our protection. Corruption keeps us safe and warm. Corruption is why you and I are prancing around in here instead of fighting over scraps of meat out in the streets. Corruption is why we win.]

OPEC failed to agree on crude production for the first time in at least 20 years after six countries opposed a Saudi Arabian push to increase supply as oil trades above $100 a barrel.
“It was one of the worst meetings we’ve ever had,” Saudi Oil Minister Ali al-Naimi said as representatives of the 12- member Organization of Petroleum Exporting Countries left the meeting in Vienna after five hours of talks. “We were unable to reach an agreement.”
Crude in New York jumped 2.7 percent in the 20 minutes after the meeting ended with a split underscoring growing divisions within the group that accounts for about 40 percent of the world’s crude. Saudi Arabia, OPEC’s largest producer, together with Kuwait, Qatar and the United Arab Emirates, proposed increasing group output by 1.5 million barrels a day to 30.3 million barrels. They were blocked by members including Iran and Venezuela, which warned of a “collapse” in prices.
“It’s a bit surprising because the Saudis usually get their way and the track record since 1998, on balance, has been pretty good,” said Mike Wittner, the New York-based head of oil-market research at Societe Generale SA, who said before today’s meeting there was a 65 percent chance OPEC would decide to raise production. “In this particular case, there were very diverse opinions going into the meeting and even looking at the fundamentals, there were different signals,” he said in an interview today.

Crude Gains

Crude for July delivery rose $1.65, or 1.7 percent, $100.74 a barrel on the New York Mercantile Exchange, the highest settlement since May 31. Gasoline for July delivery fell 1.32 cents to $2.9787.
“This is crude bullish as there is certainly no consensus within the group and OPEC is not ready to act united,” said Andrey Kryuchenkov, an analyst at VTB Capital in London, who correctly forecast the group wouldn’t change its targets. “The market remains undersupplied.”
A Bloomberg survey of 30 analysts conducted from May 24 to May 31 showed that 27 believed the group would probably leave its output target unchanged.
OPEC’s spare production capacity is poised to dwindle, David Greely, a New York-based analyst at Goldman Sachs Group Inc. (GS), said today in an interview. Rising global demand for oil will exhaust OPEC’s surplus capacity next year, said Goldman, which forecast on May 24 that Brent crude will hit $120 within six months and $130 within a year. Brent settled 1 percent higher at $117.94 today in London.

‘Disconcerting’ Outcome

While OPEC’s lack of coordination appears “disconcerting, the fact remains that the vast majority of OPEC spare capacity remains in Saudi Arabia,” Greely said. “Consequently, it still remains a question of Saudi’s willingness and ability to raise production to keep pace with world oil demand growth.”
It will be a “stretch” for Saudi Arabia on its own to add the 1.9 million barrels of daily oil out needed to meet the 30.87 million barrels of daily demand OPEC forecasts the third quarter, JPMorgan Chase & Co. analysts including Lawrence Eagles wrote in a note today. The bank reiterated its forecast that oil will reach $130 a barrel in 2011.
Oil has gained 10 percent this year, boosting revenue for producers while raising concern that price gains will stunt economic growth and stoke inflation.
The U.S. Labor Department said on June 3 that employers added 54,000 workers to payrolls in May, the fewest in eight months. The International Energy Agency cut U.S. and Japanese growth forecasts on April 11. The IEA trimmed its 2011 forecast for oil demand last month for the first time, after saying on April 12 that oil above $100 a barrel is starting to hurt the global economy.

New Powerhouse

Iran, the group’s second-biggest producer, has historically taken a harder line on prices than its regional rival Saudi Arabia. Constrained by economic sanctions over its nuclear program, it is pumping at close to its full capacity.
“Iran has replaced Saudi Arabia as the powerhouse in OPEC,” said Olivier Jakob, Managing Director of Geneva-based Consultancy Petromatrix.
Besides Iran and Venezuela, OPEC members opposing a higher production ceiling were Libya, Angola, Ecuador and Algeria. Venezuela was concerned crude prices would tumble if OPEC increased quotas, the country’s oil minister said in an interview with state television.
“There was a proposal to raise output by between 1.5 million barrels a day and 2 million,” Rafael Ramirez said. “We, given the uncertainty in the market, thought that could cause the price of oil to collapse.”

‘Vehement’ Opposition

They were “vehemently against increasing production,” Saudi Arabia’s Naimi said, adding that he and his group tried for hours in vain to persuade the six of the need for more oil. “In 16 years, I’ve never seen an obstinate position,” he said.
Mohammad Aliabadi, the acting Iranian oil minister and current OPEC president, described the meeting as “polite and cordial,” speaking through a translator. “I don’t know why he called it the worst meeting,” Aliabadi said of Naimi’s account.
Iran refused to sign on to the agreement that OPEC reached at a 1999 meeting, said Leo Drollas, chief economist at the Centre for Global Energy Studies in London. The last time OPEC adjourned a meeting with no agreement was in the early 1980s, when Iraq and Iran were at war.
The IEA expressed “disappointment” over OPEC’s failure to reach an agreement. “Of course what really matters is actual supply, which should move in line with seasonally rising demand, and we urge key producers to respond accordingly,” the Paris- based agency said in a statement.

Saudi Commitment

OPEC data show demand for its crude will rise by 2.1 million barrels a day in the third quarter from the group’s total output in April of 28.8 million barrels a day, Naimi said. “Saudi Arabia is committed to supplying the needs of the market regardless of the disagreement,” he said.
OPEC announced its biggest-ever output cuts in December 2008 amid a collapse in global demand, capping production at 24.845 million barrels a day for all members except Iraq, which is exempt from the quota system. The limit has remained unchanged since then.
The 11 nations with production quotas pumped 26.15 million barrels a day in April, according to the IEA. That leaves the group with about 4.5 million barrels a day of spare capacity, most of it in Saudi Arabia, to be tapped in an emergency.
The 50-year-old organization met as fighting in Libya shut off most of the output from Africa’s third-largest producer. A rebellion against Libyan leader Muammar Qaddafi has cut shipments from the North African country by almost 90 percent, according to Bloomberg estimates.

Late Arrival

Qaddafi’s OPEC delegate, who arrived late to today’s meeting in Vienna, said Libya will full existing agreement with oil companies within the country.
OPEC delegates weren’t able to resolve how to deal with the Libyan outage, according to Barclays Plc (BARC) analysts led by Paul Horsnell in London.
“While OPEC remains a force for the protection of any potential price downside, it now appears to be out play for the rest of the year as a constraint on the upside to prices,” Barclays said. “We continue to see price risks being skewed heavily to the upside.”

1 comment:

Making Money From Home said...

OPEC is smart. What Obama is doing to our economy is not, DIRECTLY, OPEC's problem. It has been determined by economists that $4.00 per gallon for gas in the US is the tipping point or what the US market will bare. Above $4.00 per gallon and the US economy slowly shuts down. It is no coincidenc¬e gas is $3.75-$4.2¬5 per gallon.

Europe's socialist policies have finally run out of "other people's money" and are implementi¬ng "austerity¬" measures. After watching the Reagan sparked economic boom for 25 years (1982-2007¬) Democrasts FINALLY got control of BOTH houses of COngress AND the WHite HOuse for the first time in a generation¬.
After waiting 25 years Obama and Democrats quickly set about coping Europe's socialist polices JUST AS EUROPE'S 40 year experiment with OTHER PEOPLE MONEY FAILED!!!

Obama's economic policies have TRASHED our economy and OPEC does not want to flood the market with oil as the WORLDS ECONOMY slows down.