Today, a long-awaited OPEC meeting is being held.
After several calls for an extraordinary meeting, Vienna hosts the ordinary 159th meeting of the cartel’s members. We, as well as the most of the market, believe that production quotas will be increased. The only question is by how much.
At least a part of OPEC members has clearly a problem with current prices of oil. A source from Saudi Arabia told Reuters earlier this week that the kingdom is planning to boost output by about 500 thousand barrels per day in June. Saudi Arabia (which is a major holder of OPEC’s spare capacity) is not the only OPEC member which is afraid of possible impact of high oil prices on the market (see the chart). A view that the market needs more oil is supported also by Kuwait and United Arab Emirates, which together produce almost a half of the cartel’s oil output. Hence, we believe that the OPEC will decide to boost output by more than about 1.5 million barrels per day, which is probably already priced in the market.
Today, the figures on U.S. crude stockpiles will also be released.
Codelco, an operator of the world’s fifth largest copper mine El Teniente, which has been hit by protests in last two weeks, said yesterday that the problem could be resolved by the end of this week. Despite the stronger U.S. dollar weighs on the price of copper today the metal is still trading above the 9000 USD per ton level.
Chart of the day: U.S. Product Supplied
The chart shows U.S. total crude oil product supplied (which is proxy for product demand). The chart illustrates fears from possible impact of oil prices on the demand for oil. The “demand” in 05/2011 is seen significantly below last year’s levels as well as well below longer-term average.