West Texas Intermediate (WTI) oil prices rose slightly on September 10 on the widely anticipated news that OPEC ministers in Vienna would not changed their oil production quotas, writes Tina Vital, integrated oil and gas equity analyst for Standard &Poors Equity Research. "The strengthening of global oil prices so far this year was welcomed by the ministers as providing support for the energy industry's investment plans, but they remained concerned about price volatility, which persisted despite high global levels of crude and refined product inventories in the market," she wrote. Vital said it appeared to the ministers that global oil prices have become very sensitive to external economic signals, such as the dollar exchange rate fluctuations, stock market movements and unemployment trends. The cartel is expected to reassess the market situation at their next extraordinary meeting to be held in Luanda, Angola, on December 22, 2009. A key issue for OPEC has been high global oil and refined product inventory levels, she reports, and notes that "the overhang might be reduced by stricter OPEC compliance to its output targets and/or improved economic growth and oil consumption." OPEC's discipline to its production targets is one of the most important factors determining global oil prices in 2009, according to S&P. "However, the rise in oil prices has made it more difficult for the cartel to maintain supply discipline," reports Vital. "The IEA had reported OPEC's compliance to its volume cuts at 66% in August (when WTI oil prices averaged around $71), which is down from 83% in March (when WTI oil prices averaged $48). Still, global economies are showing signs of stabilization, and global oil demand forecasts are being revised upward," she wrote. According to Vital's findings, in August, IHS Global Insight looked for global oil demand to contract 2.09 million b/d to 84.19 million b/d in 2009 (vs. its prior forecast of a 2.21 million b/d cut to 84.01 million b/d), driven by an upward revision to China's oil consumption to growth of 0.28 million b/d to 8.47 million b/d. Meanwhile, S&P Asia estimates this pickup in Chinese oil demand is due to a combination of domestic factors, including an economic pickup, commercial inventory builds, and a new pricing policy, she wrote.
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