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Producers keep eye on uncertainties of world economy

QUITO – Opec was expected to leave its two-year-old oil quotas unchanged in a meeting scheduled later yesterday in Ecuador, amid rising demand but also some uncertainties over the generally bullish outlook for the world economy.

The gathering in Quito of the 12-nation Organisation of Petroleum Exporting Countries (Opec) was also to mark the passing of the organisation's rotating presidency to Iran – the first time in 36 years the Islamic republic has held the largely symbolic leadership.

Saudi Oil Minister Ali Al Nuaimi told reporters when he arrived on Friday that rising oil prices were not a cause of worry for Opec.

The price per barrel has spiked above the psychologically significant level of $90, the first time it has done so in two years.

Oil futures trading on Friday initially pushed the price higher, to $91.40 a barrel, before falling back to $90.48 in London trade for delivery in January.

Similar surge
New York's main contract, light sweet crude for January, finished at $87.79 a barrel after a similar surge.

"I don't know why there's so much concern over prices. The prices go up, the prices go down. So what's new?" asked Al Nuami, whose country is Opec's most influential member.

The minister added that "the fundamentals are good: demand is up, supply is up". He said he expected "no change" to Opec's quotas.

Angolan Petroleum Minister Jose Maria Botelho de Vasconcelos, when asked if he though Opec might hike quotas, also said, "I don't believe so."

Most members of Opec say they support maintaining production at the same level it has been at for the past two years, 24.8 million barrels per day. The organisation accounts for nearly 40 per cent of the world's oil output.

It has maintained its official production target unchanged at 24.8 million barrels a day since January 1, 2009, when it agreed to a hefty cut aimed at boosting oil prices that had tumbled to about $30 a barrel because of the financial crisis.

For Saudi Arabia, a price range of $75 to $90 per barrel was considered adequate.

Winter demand
Some countries, though, such as Libya and Venezuela, wanted to see the price rise to $100 a barrel to generate more revenue – but many feared such a level would stifle the world's fragile economic recovery.

Stronger-than-expected demand currently experienced was attributed to a harsher-than-normal winter hitting Europe and parts of North America, increasing the need of oil for heating.

Dynamic growth in dev-eloping nations, particularly China, was spurring estimates for a rise in demand into next year and beyond.

The International Energy Agency and Opec on Friday said they were revising slightly upwards their calculation of demand for oil in 2010.

However uncertainty, especially over China, was clouding forecasts.

"Global demand growth should ease in 2011, from 2.5 million barrels per day to 1.3 million bpd, amid renewed structural OECD decline, and as post-recession froth in markets like China subsides," the IEA said.

Opec held its forecast for world oil demand growth in 2011 steady at 1.2 million bpd. Traders' fears that a slowdown in China's activity could be looming as the world's second-biggest economy struggles to fight soaring inflation led to Friday's slide in oil prices.