Opec

Remember July 2008, when crude oil reached an all-time high of $147.27 a barrel, lending credence to the principle of “peak oil”, the decade-old doctrine that holds that global crude production will crest sooner than expected and then begin a precipitous decline. Analysts predicted that prices will top $200 before the end of 2009. However, that was not to be. The worst global financial recession since World War II pushed the oil price down to $32.40 in December 2008 and now back near $70. The panic of July 2008 looks another era.

The global financial crisis and the resultant price decline have taken the edge out of the Organization of the Petroleum Exporting Countries (Opec) meetings to review its oil supply policy. One such meeting is scheduled for September 9 in Vienna. Yet, what will the Opec decide at the meeting is crucial to the world’s economic recovery. Most observers believe that the likely decision would be to keep the cartel’s output targets unchanged. Opec officials themselves have expressed surprise over the strengthening of oil prices to more than double of last December’s low even in the face of a sharp decline in demand. Oil at $70 is what many member-countries, notably Saudi Arabia, believe is fair for consumers and producers. The cartel has not altered output targets since it agreed in December 2008 to reduce total production for its 11 members with quotas, excluding Iraq, by 4.2 million barrels a day to arrest the sharpest fall in demand since 1981 as the world fell into recession.

Financial Express