Thursday, March 18, 2010 1:06 PM

Lack of Unity May Hamper OPEC’s Ability To Control Oil Market

Posted by Samuel R. Avro on Friday, November 28, 2008

OPEC’s third meeting in as many months, scheduled for Saturday, may bring about more divisions within the 13 member nations of the organization. The point of the meeting is to assess the impact of earlier production cuts. Since an emergency meeting last month in Vienna slashed output by 1.5 million barrels a day, the price of crude has fallen twenty percent.

“There is total confusion” among OPEC’s members, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. in New York. “These people … really have no business model. They basically thrive when oil prices go up, and now they are crying uncle when prices go down.”

Oil prices were trading below $52 a barrel on Friday, which just for months ago was going for $147 per-barrel.

Nigerian envoy, Odein Ajumogobia said the ministers were “just going to exchange ideas and views” at the gathering.

Crude traders and consumers will be watching to see if a further production cut is made. Although it’s not expected at this time, a surprise cut may be capable of stemming the massive drop off in crude oil prices due to the evaporation of demand caused by the worldwide economic slump.

“As long as they do a substantive cut, they may be getting ahead of the curve, and should be cutting enough to get ahead of demand destruction,” said Vincent Lauerman, OPEC expert and president of Calgary, Canada-based consultancy Geopolitics Central. He said further production cuts of around 1 to 1.2 million barrels a day may do it.

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About the Author

Samuel R. Avro

Samuel R. Avro is the founder and Editor-In-Chief of Consumer Energy Report. Sam believes that a lot more can be done about the energy problem the world is currently facing. First and foremost, the public must be made aware of all the available options. He firmly believes that the most realistic method of achieving this on a large-scale basis is to report the news for the public to read and discuss. When he isn't too busy covering the energy industry, as a New York area resident, Sam is always willing to take part in a discussion about his World Champion New York Yankees. Motto: Dissemination of information is the key!

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