Opening address to the 148th Meeting of the OPEC Conference

No 3/2008
Vienna, Austria
05 Mar 2008

by HE Dr. Chakib Khelil, Minister of Energy and Mines of Algeria and President of the Conference

Excellencies, ladies and gentlemen,
Welcome to Vienna for the 148th Meeting of the Conference.

We should like to extend a special welcome to the distinguished Observers from non-OPEC oil-producing countries — His Excellency Eng. Sameh Fahmy, the Minister of Petroleum of Egypt; His Excellency Dr Aldo Flores, the Assistant Minister of Energy of Mexico; His Excellency Nasser bin Khamis Al Jasmi, the Deputy Minister of Oil and Gas of Oman; His Excellency Anatoly Yanovskiy, the Deputy Minister of Industry and Energy of the Russian Federation; and His Excellency Al Zubair Ahmed Hassan, the Minister of Energy and Mining of Sudan. We thank them for joining us at today’s Meeting and for their visible expression of support for our efforts to achieve order and stability in the international oil market. We are also pleased to welcome His Excellency Suleiman J. Al-Herbish, the Director-General of the OPEC Fund for International Development.

Every so often, there is a discernible change in the oil market’s behaviour; sometimes, this is apparent at an early stage, while, on other occasions, it becomes clear a little later in its development. We last saw this in the middle of 2004, when a combination of factors, with which we are now all familiar, began to exert persistent upward pressure on oil prices, and this was accompanied by high levels of volatility. This followed several years of stable market conditions, to which OPEC contributed through its decisions and actions at the start of the century.

In recent months, there have been signs that the oil market is moving into a new phase. This has reflected developments in the world economy, which is now entering a period of slower growth, after an unprecedented six years of strong expansion. Turbulence in financial markets, the deepening sub-prime mortgage crisis in the United States of America and weakening economic data in the European Union and Japan support expectations of a general economic slowdown in all OECD regions. Whether this will affect growth prospects in emerging economies will depend largely on the degree of spillover to the rest of the world from these developments. Nevertheless, initial estimates indicate that the economies of developing countries, including China and India, will continue to grow at healthy levels, albeit lower than those achieved in 2007.

Overall, however, the growing sense of despondency about the future global economic outlook is generating much uncertainty in energy circles, and many institutions have begun to revise down oil demand forecasts from initially high levels. Clearly, as we pointed out at our Extraordinary Meeting on 1 February, constant vigilance is required to assess the impact of this on the oil market, especially in the coming quarters.

This has been adding to the impact of the continuing volatility in the market, with crude oil prices detached from the fundamental dynamics of supply and demand. This is disturbing for all responsible parties, producers and consumers alike. In the longer term, there are no net winners from volatile markets.

After our February Meeting, oil prices moderated for about a week, before strengthening steadily to their present levels. These are being determined mainly by the ongoing bottlenecks in the refining sector, production problems in some countries, geopolitical developments in certain regions and the fall in the value of the US dollar, which has encouraged inflows of new money into the crude oil futures market. Heightened levels of speculation have been a major driving force behind the volatility of the past few years, and this has not been welcomed by our Organization.

While OPEC itself has little or no influence over speculation, it has taken action in other important areas where it can make a solid, meaningful contribution, in the interests of market order and stability. Our latest measures, adopted in September — to increase crude oil supply by 500,000 barrels a day, with effect from 1 November — have been fully implemented, and OPEC is now producing 32 million barrels a day.

As a result, the market continues to be well-supplied with crude oil. Commercial oil stocks — crude and products — are in line with the seasonal trend and are expected to remain within their five-year average during the traditionally lower-demand season.

Therefore, the market should be characterised by stability, and not volatility.

Therefore, Excellencies, ladies and gentlemen,

As we meet today, we shall be examining all these factors, to see what further measures can be taken to achieve and maintain an orderly oil market in the coming months and on into the rest of the year.

Thank you for your attention.