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OPEC Output Hike to Have Little Impact on Oil Prices: London Analysts

Posted on: Friday, 16 September 2005, 18:00 CDT

By Ian Green

London, Sept. 16 (Jiji Press)--Oil prices will be affected little by any decisions taken at the upcoming meeting of the Organization of the Petroleum Exporting Countries, market analysts told Jiji Press Friday.

OPEC is likely to decide to increase its official daily output quotas by 500,000 barrels to 28.5 million barrels during its meeting in Vienna Sept. 19-20.

But analysts in London believe that the oil cartel is no longer in a position to influence prices and that the outcome of the meeting will be largely irrelevant.

Leo Drollas, deputy director of the Centre for Global Energy Studies, explained: "Any extra oil would just be stored in inventories because it's not the crude people want. It might help the market a bit but not substantially."

"The fact is the current market is demand driven and we have capacity constraints, so there is very little for OPEC to do. A demand-driven problem needs demand solutions, not supply solutions," he said.

Valery Marcel, energy analyst with the Royal Institute for International Affairs, said that there would be "no change at all in the markets" following the OPEC meeting and that any hike in quotas would be "little more than a gesture".

Kona Haque of the Economist Intelligence Unit agreed that a quota hike would be a "political move" and that the price impact would be "neutral." OPEC, she said, had "lost control of the market."

Haque forecast an average price of 64-65 dollars per barrel for London Brent crude oil futures in the fourth quarter of 2005, while Drollas predicted an average of 66 dollars. October futures settled on Thursday at 63.16 dollars per barrel.END

Source: Jiji Press English News Service

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