Amadeusz Juskowiak

Opec may have to meet to firm prices analysts

OPEC may be forced to meet before a scheduled June session to readdress its production cutting agreement if the organization wants to halt the current slide in oil prices oil industry analysts said

The movement to higher oil prices was never to be as easy as OPEC thought They may need an emergency meeting to sort out the problems said Daniel Yergin director of Cambridge Energy Research Associates CERA

Analysts and oil industry sources said the problem OPEC faces is excess oil supply in world oil markets

OPECs problem is not a price problem but a production issue and must be addressed in that way said Paul Mlotok oil analyst with Salomon Brothers Inc

He said the markets earlier optimism about OPEC and its ability to keep production under control have given way to a pessimistic outlook that the organization must address soon if it wishes to regain the initiative in oil prices

But some other analysts were uncertain that even an emergency meeting would address the problem of OPEC production above the 158 mln bpd quota set last December

OPEC has to learn that in a buyers market you cannot have deemed quotas fixed prices and set differentials said the regional manager for one of the major oil companies who spoke on condition that he not be named The market is now trying to teach them that lesson again he added

David T Mizrahi editor of Mideast reports expects OPEC to meet before June although not immediately However he is not optimistic that OPEC can address its principal problems

They will not meet now as they try to take advantage of the winter demand to sell their oil but in late March and April when demand slackens Mizrahi said

But Mizrahi said that OPEC is unlikely to do anything more than reiterate its agreement to keep output at 158 mln bpd

Analysts said that the next two months will be critical for OPECs ability to hold together prices and output

OPEC must hold to its pact for the next six to eight weeks since buyers will come back into the market then said Dillard Spriggs of Petroleum Analysis Ltd in New York

But Bijan MoussavarRahmani of Harvard Universitys Energy and Environment Policy Center said that the demand for OPEC oil has been rising through the first quarter and this may have prompted excesses in its production

Demand for their OPEC oil is clearly above 158 mln bpd and is probably closer to 17 mln bpd or higher now so what we are seeing characterized as cheating is OPEC meeting this demand through current production he told Reuters in a telephone interview