OPEC ministers are on a PR blitz today, all trying to drive home the point that they will keep producing at current high levels. Indeed, OPEC President Edumun Dakoru says OPEC will stay out of the politics and geopolitics of such member countries as Iran and his home country of Nigeria.
Meanwhile, oil prices are reflecting and believing some of that comfort, aided also by US inventories that are relatively plentiful and the fact that the current spate of warm weather has reduced the demand for home heating oil. 30-day futures are below $66, and have a bit more stability than they did over the past couple of weeks.
However, oil prices have gained some 7 pct since the start of the year on rising geo-political tensions, mainly in Iran and Nigeria, and increased investment from funds.
Analysts say the uptrend in prices is still in place.
‘For the moment, mild weather, nominal economic expectations, rising gasoline stocks and the lack of an imminent physical supply threat leaves sellers in momentary control,’ asid Fimat analyst John Kilduff.
‘But the greater macroeconomic elements that brought prices to this level remain in place,’ he warned, adding that Hamas’ victory in the Palestinian elections does not bode well for stability in the Middle East.
Although the market’s perception of the risk associated with Iran has eased somewhat in the past few days, the actual and potential supply problems in Iran and Nigeria remain in place, analysts said.
Around 220,000 bpd of light sweet crude remains offline in Nigeria following a month-long sabotage campaign by militants, while in Iran, supply risks remain.
Iran produces some 2.4 mln bpd of oil and dealers fear it could withhold this from oil markets if it is referred to the UN Security Council over its move to resume uranium enrichment.
This is the fear that OPEC is trying to quell, trying to persuade market participants that Iran will not use its domestic oil supply as a strategic geopolitical tool. That’s a hard bit of persuading to do, I think.