VIENNA, Austria – As OPEC’s leaders prepare to discuss oil price and output targets amid strong demand, analysts wonder if the cartel’s influence has waned at a time when producers outside the cartel such as Russia and Norway are gaining clout.
Adam Sieminski, an oil price strategist with Deutsche Bank in London, said given the fact that crude futures are well above the cartel’s current price target – even as OPEC members pump more than their official quotas allow – “it doesn’t really matter very much” in the short-term what the group decides.
Oil prices have soared all summer because of the extremely thin margin of spare output capacity worldwide and fears of supply disruptions around the globe. On Monday, crude futures hovered near $44 a barrel as traders focused on Hurricane Ivan’s path and the potential damage it might cause to oil and natural gas rigs in the Gulf of Mexico.
The world’s supply cushion is thin in part because the Organization of Petroleum Exporting Countries vastly underestimated oil demand growth, particularly in China and the United States, earlier in the year, analysts said. Now it seems the group lacks the ability to increase production quickly enough to bring prices down.
Recent attempts by oil superpower Saudi Arabia to lower prices have failed.
The Saudis said last month they were willing to put on the market an additional 1.3 million barrels per day, virtually all of their extra available production. But with daily global consumption around 82 million barrels, the comments served only to highlight to the market’s supply limitations in the eyes of many analysts.
Sieminski said OPEC “production is already over quota and over the likely higher quota” the cartel is expected to announce at its meeting this week.
His comments came before Algerian Oil Minister Chakib Khelil said he supported increasing OPEC’s output by 2 million barrels a day, or more than 7 percent, when it meets Wednesday.
That decision, if approved, would increase OPEC’s self-imposed output limit for all its members, except Iraq, from 26 million barrels a day to 28 million barrels.
Doing so would bring the cartel in line with actual output, which is currently more than 27.4 million barrels.
Another senior delegate, who wasn’t identified, told Dow Jones Newswires that the cartel isn’t likely to change its current price band of $22-$28 a barrel.
Qatar’s oil minister, Abdullah bin Hamad, said raising the cartel’s ceiling on output won’t be the main topic of discussion. And Hamad said he believed raising the price band to $30 a barrel was a good idea, since it would be “a good level for consumers and producers.”
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