December Conference will cap busy year

OPEC Bulletin Commentary November 2011

As 2011 draws to a close, OPEC's Oil Ministers will reflect upon a busy year with some notable unexpected developments when the 160th Meeting of the Conference is held in Vienna on December 14.

Many of them will be fresh back from the 20th World Petroleum Congress, hosted by OPEC Member Country Qatar in Doha, where the challenges facing the oil market provided one of many energy issues examined in depth by the well-informed participants. Some Ministers may also have been able to make the trip further south to Durban for the overlapping 17th Conference of the Parties to the UN Framework Convention on Climate Change, to ensure that the interests of oil-producing, developing countries are fully and fairly represented as the ongoing negotiations seek to secure a post-Kyoto agreement.

Shortly before that, also in Vienna, experts from OPEC, the International Energy Forum and the International Energy Agency held a second joint workshop on a topic which has troubled the oil industry for most of the new century - the impact of the financial markets on oil prices. Despite the progress that has already been made to strengthen financial sector regulation since 2008, the price volatility we have continued to see in the oil market this year suggests that there is still much further to go before prices better reflect supply and demand fundamentals.

Few people would dispute the fact that two topics have come to the fore on the international agenda this year in an unexpected, but pronounced, way, with implications extending into the world economy, including the oil sector - the upheavals in parts of the Middle East and North Africa and the sovereign debt crisis in the Euro-zone. Both are still very much active issues, with no clear vision of an ultimate resolution, and add to the uncertainty facing planners as they seek to ensure steady, secure supplies of crude in the future, in line with OPEC's longstanding commitment. These two topics, therefore, may well command the special attention of the Ministers at the Conference, together with the more familiar issues that need to be assessed when reviewing the market outlook for the coming months and beyond.

The Ministers will be eager to reach a market-related agreement at the 160th Meeting of the Conference, to complete the unfinished business from June. However, perhaps some outside observers made too much of what happened at the 159th Meeting. It is by no means unusual for an institution of any sort to fall short of a consensus sometimes, especially during periods of high pressure. OPEC is no exception. Notwithstanding this, if one looks back over the years, one would see that the Organization has a very good record of reaching sound, realistic production agreements at the Conference, benefiting all parties. Take the December 2008 agreement, for example, which put a floor under collapsing oil prices and supported them as they rose again to levels acceptable to producers and consumers alike.

Also, one must not overlook the fact that the Conference has other important business to conduct at its meetings. Such gatherings are not just about preparing high-visibility production agreements that are announced to the media at the concluding press conferences. As OPEC's supreme authority, the Conference reviews and decides upon a wide range of issues relating to the way the Organization performs, notably through its Vienna-based Secretariat. Some of these may be of a routine nature, including market updates, budgets and staff matters, while others may concern new challenges that arise where our Member Countries seek dedicated in-house analysis and advice. The smooth running of these and other regular processes is a clear, though often understated hallmark of any institution's success.

The year 2011 has demonstrated once again the unpredictability of world affairs. Institutions of any persuasion or discipline, however, must adapt to changing circumstances, however severe, as they arise, and this is often at very short notice and shrouded in uncertainty. Dialogue is important here. The 20th World Petroleum Congress, for example, could not have come at a better time in the build-up to the 160th Meeting of the Conference. Insights gained from such events will clearly benefit OPEC's Ministers during their deliberations in Vienna on December 14.

OPEC Bulletin November 2011

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