Opec will ignore pleas from America and Europe to ease record oil prices and leave the level of barrels it is pumping unchanged, analysts said.
At a meeting in Vienna today, representatives from the cartel of 13 oil-producing nations are expected to cite worries about a possible recession in America, and the beginning of a seasonal slowdown in consumption as winter comes to a close, as reasons for keeping the same production level. Continued unrest in the Middle East will also likely be highlighted.
Abdullah bin Hamad al-Attiyah, the oil minister of Qatar, an Opec member, told journalists yesterday: "We know our customers very well. We ask them very simple questions, like, 'Do you need more oil?' The answer is 'no'."
Earlier this week, oil prices breached a new inflation-adjusted high, hitting $103.76 per barrel in New York. That is a touch above the $38 it reached in 1980 as a result of the Arab oil embargo. Politicians in America and Europe have hit out at the cartel, controller of 40 per cent of the world's production capacity, as soaring oil prices have led to record petrol prices, contributing to inflation just as their economies slow.
Opec has got production decisions wrong many times in its history, to its cost. Flooding the market with increased production when demand falls has led to price collapses. The cartel is keen to avoid a repeat of such a situation. "They won't do anything. They are going to play it safe," said Manouchehr Takin of the Centre for Global Energy Studies.
Governments baying for relief do so with some reason. Opec has cut production twice in the last 18 months. The most recent production cut, in January of last year, was done after the oil price fell to the low $50s. Since then, the price has roughly doubled, as governments have drawn down their inventories in an effort to escape the high prices.
Mr Takin estimates that the cuts have reduced output, estimated to be around 29.7 million barrels a day, by about 700,000 barrels. In practical terms only Saudi Arabia can appreciably increase production, as all other members are already pumping at capacity.
Paul Sankey, an analyst at Deutsche Bank, argues that oil's headline price may be high but that it represents nowhere near the economic drag that it is was in the darkest days of 1979-80. Then, oil accounted for nearly 8 per cent of US gross domestic product, while today it is just over half that, at around 4 per cent.Reuse content