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Forbes: OPEC Holds Output

Lionel Laurent, 12.05.07, 7:36 AM ET 
 
LONDON – If the world wants more of OPEC’s oil, it will have to wait until February.

The oil-exporting cartel said on Wednesday that it had decided to keep production quotas on hold, dashing hopes of a 500,000-barrel-a-day output hike. Although it will review this decision at the next meeting in February 2008, the prospect of a winter without a helping hand from the 13-member organization has put added pressure on oil prices.

The European Brent crude benchmark price rose $1.90, or 2.1%, to $91.49 per barrel, during midday trading in Europe. Unusually, Brent crude is now more expensive than the U.S. West Texas Intermediate benchmark, which fell 1.1%, to $88.32 per barrel, on Tuesday. A similar situation took place this summer following a refinery shutdown in Cushing, Oklahoma.

OPEC delegates told the press once again on Wednesday that the market was well supplied and needed no output increase. But with the price of oil so sensitive to any unforeseen developments, such as the Enbridge (nyse: ENB – news – people ) pipeline explosion last week that cut Canadian supplies to the United States, could the cartel’s refusal to throw traders a lifeline push oil back up toward $100?

“I don’t know that this is going to set us up for another run at $100,” said Simon Wardell, energy analyst with Global Insight, who had predicted OPEC’s output freeze. He said that the cartel would actually produce more oil in December than before, thanks to Abu Dhabi completing maintenance works and Saudi Arabia putting a new field onstream.

“They were a bit under quota last month, and we could see them going a bit over quota,” said Wardell. The cartel’s official daily output is currently 27.25 million barrels.

European integrated oil stocks gained on the news, with Royal Dutch Shell (nyse: RDSB – news – people ) ‘B’ shares up 1.3% to 19.63 pounds ($40.03), BP (nyse: BP – news – people ) up 0.6% to 591 pence ($12.05) and France’s Total (nyse: TOT – news – people ) up 1.6% to 55.69 euros ($81.94). Wednesday’s rally extended Tuesday’s positive performance, following a surprising new U.S. intelligence report on Iran, which could ease international pressure for harsh sanctions on investing in the Islamic republic. (See “Iran: No Nukes Is Good Nukes”)

http://www.forbes.com/markets/2007/12/05/opec-oil-energy-markets-equity-cx_ll_1205markets08.html

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