By HE Mohammad Aliabadi, Acting Minister of Petroleum of the Islamic Republic of Iran and President of the Conference
Excellencies, ladies and gentlemen,
Welcome to Vienna for the 159th Meeting of the OPEC Conference.
I should like to extend a special welcome to three Ministers who have been appointed since our Meeting in December and who are, therefore, attending the OPEC Conference for the first time as Heads of their Countries’ Delegations. They are: His Excellency Abdul-Kareem Luaibi Bahedh, who is the Minister of Oil of Iraq; His Excellency Dr Mohammad Al-Busairi, who is the Minister of Oil and the State Minister of National Assembly Affairs of Kuwait; and His Excellency Dr Mohammed Bin Saleh Al-Sada, who is the Minister of Energy and Industry of Qatar. At the same time, let us extend a welcome to Engineer Goni Musa Sheikh, Nigeria’s Governor for OPEC, who is leading his Country’s Delegation to our Meeting. We look forward to their wise counsel in our discussions. Let me take this opportunity, also, to record the Organization’s appreciation to their predecessors and wish them every success and happiness in the future: His Excellency Dr Hussain Al-Shahristani for Iraq; His Excellency Sheikh Ahmad Al-Abdullah Al-Ahmad Al-Sabah for Kuwait; and His Excellency Abdullah bin Hamad Al Attiyah for Qatar.
Today, we shall look at developments in the international oil market since our last meeting in Quito on 11 December 2010. This period has been marked by high levels of volatility and an upward trend in prices. On several occasions in April 2011, the price of the OPEC Reference Basket topped US$120 a barrel. Then early May saw a reverse, with the sharpest weekly price decline on record, as both WTI and Brent lost almost $17 a barrel. All in all, however, while prices have slipped back from their earlier peaks, they are still well above what we saw at our Meeting in Ecuador six months ago.
But the story goes deeper than this: when we look at currency movements and the inflation, the OPEC Reference Basket rose by only 16% while, in nominal terms, the Basket has risen by 24% since the start of the year.
The early onset of winter had an initial impact on the situation. So did forecasts of a quicker-than-expected rise in oil demand and a surge of investment flows into commodity markets, including crude. However, the market outlook has been dominated more recently by the political developments in the Middle East and North Africa. There has also been the triple disaster in Japan. Our sympathies go to those affected by all these tragic events, and we look forward to their early solutions.
There is still much uncertainty about the strength of the world economic recovery. While the developing economies continue to be the main drivers of growth, particularly China and India, there are still some notable points of concern. These include the persistently high level of unemployment, the sovereign debt crises in major OECD countries, potential overheating in many emerging economies and rising inflation across the globe. These are all important factors, they can interact with each other and they can all influence the return to steady economic growth.
In short, it has been a nervous six months for the oil market. Throughout, however, fundamentals have remained sound. Very much due to OPEC’s efforts, the world remains well-supplied with oil, with ample spare capacity and adequate stock levels. However, it appears that there is not enough effective spare capacity in the downstream sector, which has recently led to further spread of sweet and sour crudes. Despite that shortage, generally, the basics are right for market stability.
Therefore, when we seek to gain a deeper insight into the recent volatility, our attention turns to the financial sector. Since our last meeting, speculative activity on the Nymex has reached record highs. This saw, for example, open interest for Nymex WTI exceed 1.5 million futures contracts by mid-March; this was an astonishing 18 times higher than the volume of daily traded physical crude. Excessive speculation in the futures markets increases volatility unrelated to fundamentals and efforts by governing and regulatory bodies in the consuming countries to minimize such speculation remain imperative.
Let me repeat once again OPEC’s longstanding message. Oil market stability is the responsibility of all parties – producers and consumers alike. We all benefit from stability, and so we must all contribute to it. OPEC plays its part to the full, by ensuring that there is always enough oil to fuel the world economy and support growth. Other stakeholders must cooperate with us in achieving lasting stability, from which the world community at large will benefit.
Excellencies, ladies and gentlemen,
It is clear from these opening remarks that there is much to talk about as we examine the market outlook for the coming months and beyond and take the decisions we deem necessary. And so let us now proceed with the meeting.
Thank you for your attention.