Oil prices jump as Opec keeps output unchanged

World oil prices surged above $91 after the Organisation of Petroleum Exporting Countries (Opec) froze its production at current levels at a meeting in Abu Dhabi yesterday.

Opec justified the decision on its assessment that it is already pumping enough crude to meet winter fuel demand after a September decision to lift output. The conference emphasised the organisation's determination to keep the market stable by maintaining a balance between supply and demand.
"Having reviewed the oil market outlook, including the overall demand-supply projections for the year 2008, the conference observed that market fundamentals have essentially remained unchanged, with the market continuing to be well supplied and commercial crude/product stocks remaining at comfortable levels, in terms of days forward cover," said a communique issued at a Press briefing.

The conference also observed that world oil prices remained volatile in major part due to the perception of market tightness by market players, exacerbated by non-fundamental factors, including the heavy influx of financial funds into commodities. Geopolitical developments have also contributed to price volatility, it noted.

Next meeting: The conference also decided to convene an extraordinary meeting in Vienna on February 1, 2008.

The conference agreed that Angola and Ecuador should have a production allocation of 1.9 million barrel per day and 520,000bpd respectively.

UAE Energy Minister Mohammed bin Dha'en Al Hamili, who is also Opec president, said that oil prices are determined by market and not by the producers.

In reply to a question regarding an impact of peaking winter demand on oil prices, he said there was no reason for prices to climb. Al Hamili said that the Opec wants a stable market.

The UAE minister said his country is building up a new production capacity to calm the market.
In London, Brent North Sea crude for January delivery soared $1.49 to $91.02 per barrel, after earlier hitting $91.91. New York's main contract, light sweet crude for January delivery, surged $1.51 to $89.83 per barrel after striking as high as $90.39.

Ecuador membership: Earlier, the 146th meeting of Opec was held in Abu Dhabi under the chairmanship of Mohammed bin Dha'en Al Hamili.

Ecuador resumed its membership after 15 years. Egypt, Oman, Sudan and Syria also attended the Opec meeting as observers.