Conference meets amid relative calm in market

OPEC Bulletin Commentary June-July 2013

The 163rd Meeting of the OPEC Conference passed in a quiet and effective manner in Vienna with the widely expected outcome.

The Oil/Energy Ministers reviewed the oil market outlook for the rest of the year and beyond, assessed associated matters and retained the existing production ceiling of 30 million barrels/day for the Reference Basket.

Meetings of the Conference are less frequent now than at any other time this century. And when they do occur - twice a year - they tend to be shorter. This is good for order and stability in the market and is precisely what is needed at the present time.

There was, indeed, general satisfaction with price levels as the Ministers gathered. After a significant fall in early-April, the average weekly price of the Basket had settled in a comfort zone of around $99–102/barrel in the six weeks up to May 31 meeting. And it stayed there until early July.

Secretary General, Abdalla Salem El-Badri, said after the meeting that the Ministers were very happy with the current level of oil prices. Moreover, with the market well-supplied with oil and OPEC’s own production at a moderate level, he asked: “Why should we change anything? It is working.”

The outlook for the second half of the year is a positive one and a welcome contrast to some of the gloomier forecasts we have seen since the financial crisis of 2008.

June’s OPEC Monthly Oil Market Report, which appeared 11 days after the meeting, wrote: “Overall, existing fundamentals portray a market with ample supply, which is further reflected in comfortable crude oil stock levels and improving gasoline inventories at the start of the driving season.” But it cautioned: “Uncertainties on both the demand and supply side have the potential to undermine the expected market balance in the second half of 2013.”

In short, there is no room for complacency among groups like OPEC that are committed to market stability.

Nevertheless, as we enter the summer holiday season — which this year includes the holy month of Ramadan — there is a relative calm in the market, and we hope that this will remain the case well into the future.

We shall do our best to support this.

OPEC Bulletin June-July 2013

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