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Oil Markets Welcomed OPEC Decision

Source: 5/30/2009, Location: Asia

Iran's OPEC governor, Mohammad Ali Khatibi said oil markets welcomed OPEC decision to maintain existing curbs as oil prices continue to rise.

Khatibi told these upper prices could not be very much reliable, over the concerns that fundamental factors did not support the global crude prices.

On this basis, 12 OPEC members produce 28mln b/d oil which is higher than the market demands.

Khatibi said, in its current meeting (May 28), OPEC evaluated the inventories in both producing and consuming countries much higher than the market demands. Despite the fact that signs of improving world economy raised; however, it is too early to rely on the market demands to be rised, he added.

In 2008, the global financial crisis dragged down oil prices from record highs of nearly $150 a barrel.

He said in the meeting, members announced that higher prices were not due to the market fundamentals but increasing hopes over the global financial recession to be bottom out and dollar weakness are the reasons for the crude price to be increased.

Khatibi said if current recovery in global markets keep continuing, and worldwide economy, which has shown improvement, continue to end the recession, then there will be hopes to increase in consuming demands. However, there would be possibilities for higher fluctuations in crude markets, if the global economy not recovered.

"Current worldwide markets are not as much reliable but OPEC agreed to maintain the existing curbs," he said.

Asked whether OPEC would have another extraordinary meeting in case of higher fluctuations, Khatibi said, no decision have been made and it will be a normal meeting in September. But in case of serious fluctuations, there must be another extraordinary meeting.

Optimistically, OPEC production stands at the market demand, but cautious evaluations indicating that OPEC supply more that the market demands, he added.

Higher inventories in producing and consuming countries indicate that global markets oversupplied.

OPEC decided at the meeting on Thursday in Vienna to keep production quotas unchanged, banking on a recovery in oil demand toward the end of this year.

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