Opec may not tweak output ceiling on supply worries

June 10, 2014

Opec is set to stick by its oil output ceiling when it meets this week, as supply tensions linked to global crises help to keep crude prices high, benefitting producers.

The Organisation for Petroleum Exporting Countries is widely predicted by experts to keep its daily output ceiling at 30 million barrels of oil.

While Opec is satisfied with current price levels at around 100 dollars a barrel, the cartel is in fact pumping below its collective target owing to abundant supplies in top crude consumer the US. Offsetting this are worries of potential supply strains as Ukraine risks sliding into all-out civil war.

Investors are concerned that a full-blown conflict in Ukraine would disrupt supplies and send energy prices soaring. Russia accounts for nearly 40 per cent of EU gas imports, with half of that transiting through pipelines in Ukraine. While higher oil prices boost the coffers of producers, they can weigh heavily on economic growth, dampening demand and resulting in price weakness down the line.

Crude prices have meanwhile won support since Opec’s last meeting in December also on solid demand from Asian powerhouse China despite jitters over its economic slowdown. “It should be a very quick meeting,” Bill Farren-Price, head of energy consultancy Petroleum Policy Intelligence, said of Opec’s gathering in Vienna on Wednesday. “Prices are very stable and in a comfortable place, the market is pretty balanced for the moment, China has been importing more crude than expected over the last few months and the Ukraine crisis has helped keep the price underpinned.

Copyright, OMAN Tribune, 2014.