Keeping it simple, keeping it steady in September

OPEC Bulletin Commentary September 2011

September 2011 has been different to every other September so far this century. There has been no OPEC Conference.

This comes as no surprise following our decision late last year to revert to our former practice of holding Ordinary Meetings of our Conference in June and December, rather than in March and September which had been the case since 1999. Among other things, this enables us to review the market outlook from the more usual and convenient annual perspective.

However, the lack of even an Extraordinary Meeting in September highlights our recognition of the fact that the summoning of the supreme authority of our Organization must be done only when this is absolutely essential, outside of the Ordinary Meetings.

Our experience over many years has taught us two things.

First, there is the oft-repeated phenomenon that the build-up to an OPEC Conference can itself be a destabilizing factor in the market, as speculators try repeatedly to second-guess the outcome, which only adds to any volatility that may be around at the time. The same is true during the meeting itself and in its aftermath. So why rock the boat in a period of relative calm by holding extra Meetings of the Conference when they are not absolutely necessary? It is best to keep things as simple and as steady as possible.

And then there is the fact that, with markets well supplied with crude for the foreseeable future and with OPEC having sufficient excess capacity to make up for any unexpected shortfalls, there is little the Organization can do to affect the situation at times when prices are influenced so heavily by the actions of the financial sector.

OPEC's practice of choosing with utmost care when we hold our Conferences ties in fully with our time-honoured commitment to market order and stability. We are constantly monitoring market developments, and we are ready and able to act in a constructive and positive manner whenever we consider this to be necessary - as we did with much success in December 2008, when oil prices were spiralling downwards below levels considered healthy for the future welfare of the industry and for the ongoing interests of producers and consumers alike.

Of course, as we keep saying, other parties have a key role to play here too - both within the oil industry and in such outlying areas as the financial sector, which has been responsible for much of the price volatility seen over the past decade. While we welcome measures that are already being taken in some advanced consumer economies to tackle this, they do not seem to go far enough, judging from the amount of price volatility still apparent in the market. As our latest Monthly Oil Market Report (MOMR) puts it: "The high volatility could be explained by the large uncertainty surrounding market sentiment. The fluctuation in crude oil prices was in tandem with the movement in financial markets, in particular equities, suggesting that investors focused on broader macroeconomic risks and concerns of stagnating global economic growth."

As we look ahead to the final part of this year, our perception is that the market tightness and worries of supply shortages in the fourth quarter are easing, as is also pointed out by the MOMR, together with the reasons for this.

This reduces even further the need for our Conference to meet in the remaining part of September, or at any time between now and our Ordinary Meeting in Vienna on December 14. During this period, we shall, as ever, monitor market developments very carefully and respond, if necessary, in the best interests of all parties.

OPEC Bulletin September 2011

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