27/05/2009
VIENNA, May 26 (Reuters) - OPEC ministers are expected to leave output unchanged at their meeting in Vienna this week, as they pin their hopes on a sustained oil price rally in defiance of swollen stocks and depleted demand.
Oil has recovered from a low of $32.40 in December last year to hit a new six-month high above $62 a barrel on Tuesday.
The price is below the $75-$80 Saudi Arabian Oil Minister Ali al-Naimi said on Tuesday he hoped to see as early as the second half of this year, but well clear of the $50 a barrel the kingdom had said it could live with while the world economy healed.
On arrival in Vienna ahead of Thursday's meeting, Naimi repeated comments he made at the weekend in Rome that OPEC would "stay the course". He added there was not yet a consensus among ministers.
Naimi anticipated stronger demand in the third or fourth quarters and also said oil could rise to $75 around then.
"God willing, in the near future," he said further, when asked by Reuters when $75 a barrel could be achieved.
Leading OPEC producer Saudi Arabia, as well as other ministers and oil companies, has said that was roughly the level needed to ensure new investment for the long term.
Before Tuesday, Naimi had only said the oil market would eventually strengthen and his bullishness for the near term helped to push U.S. crude to its new six-month high of $62.50.
BIG SHIFT SINCE LAST MEETING
When the Organization of the Petroleum Exporting Countries last met in March, oil was below $50.
Citing the need to restore the economy, which in turn would boost oil demand, the group then called only for better adherence to existing output curbs, rather than making new ones.
The oil price has since risen by roughly a third, although the fundamentals of supply and demand have stayed weak.
"Members are a lot more relaxed now than they were in March," an OPEC delegate told Reuters. "The higher price has taken the pressure off OPEC."
The delegate predicted Thursday's meeting would be short and without surprises.
Oil markets have drawn strength from record output cuts from OPEC, totalling 4.2 million barrels per day since last September. Compliance with the promised curbs has been very high at around 80 percent, analysts have estimated.
But oil's recovery from last December's lows, which were the weakest since early 2004, has also been driven by expectations, rather than firm evidence, of economic recovery.
Some OPEC members are nervous the rally is fragile, although financial markets on Tuesday were supported by a survey showing consumer confidence in the United States, the world's biggest economy and biggest energy consumer, had hit the highest level in eight months.
Among the more bullish oil analysts, Paul Horsnell of Barclays Capital said $75 was possible and oil market fundamentals were tightening.
"Rollover this time and start to think about letting more out later in the year if the numbers continue to move in the right direction," Horsnell said, predicting the outcome of Thursday's meeting.
"Global (oil market) balances are looking more constructive."
One measure carefully monitored by OPEC is inventory levels translated into days of forward cover.
As economic weakness has eroded fuel demand, oil inventories in developed countries have risen to the equivalent of 62.4 days of forward cover, the most since 1993, according to the International Energy Agency.
OPEC wants the number to shrink to 53 days, which should happen "over time", Naimi said.
