The quest for price stability in uncertain times

OPEC Bulletin Commentary May 2012

As OPEC approaches the mid-year Meeting of its Ministerial Conference on June 14 in Vienna, there is still much uncertainty in the air about the outlook for the world economy and hence energy and oil demand. Indeed, most recently, added concern about the world economic outlook has been reflected in a general weakening of oil prices.

OPEC's latest Monthly Oil Market Report (MOMR) puts it as follows: "Overall, the global economic outlook remains fragile, with heightened uncertainties in the Euro-zone and potential spill-over effects in the emerging markets."

Turning to demand, it states: "Given the stabilization of the US economy and the shutdown of Japanese nuclear power plants, world oil demand growth has - at least, for the short term - stopped its declining trend and is showing some growth. Oil demand in non-OECD countries is also indicating a slight improvement."

And on supply, the MOMR notes that incremental non-OPEC supply and the increase in OPEC output of natural gas liquids will satisfy expected growth in world oil demand this year. It stresses that higher OPEC crude oil production underscores the current trend of plentiful supply in excess of market requirements.

Clearly, many uncertainties abound at the present time and efforts must be made to minimize the impact on oil prices of a sudden change in perceptions. In this light, it is worrying to note that, shortly before we went to press, expressed concern about a weakening global economy saw OPEC's Reference Basket price lose $7.69/barrel in just three days.

This will be the situation facing OPEC's Oil and Energy Ministers in the Austrian capital, as they assess the oil market outlook for the coming months and on into 2013. They will be helped, as usual, by the market reports they receive from the Secretariat, as well as by input from the Member Countries themselves.

However, there will be valuable additional support this time, since the Conference is scheduled to meet at the Organization's modern new headquarters building shortly after the doors close on the 5th OPEC International Seminar in the nearby ancient splendour of the Hofburg Palace.

The Seminar - with the theme 'Petroleum: Fuelling Prosperity, Supporting Sustainability' - will provide an opportunity for experts and decision-makers at the highest levels to deliberate upon key issues of the day in the realm of global energy and associated areas. Participants will include Ministers from OPEC's Member Countries and other oil-producing states, heads of intergovernmental organizations, chief executives of national and international oil companies, academics and the media.

OPEC's Ministers, in the build-up to the Conference, will be interested in the broad range of topics covered by the Seminar, which, taken together, provide a comprehensive picture of the multifaceted challenges facing the industry in the coming decades.

The four main sessions will be dedicated to the following topics: 'The global energy scene', 'Oil and the world economy', 'Capacity expansion and investment' and 'Technology, environment and policies'. Finally, a concluding panel discussion will seek to draw out key insights from the Seminar to provide some timely, useful, thought-provoking messages to take away from the event.

The benefits of all this to OPEC's Ministers are clear and are likely to enrich their discussions during the 161st Meeting of the Conference, as they address some of the very real challenges facing the industry at the present time. And their sights will be set specifically on restoring stability to oil prices, in the interests of producers and consumers alike and in support of sound world economic growth.

OPEC Bulletin May 2012

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