LONDON, Sept. 21 (UPI) -- OPEC is feeling comfortable with the current oil price but its confidence can easily be dented by any combination of likely events, including conflict in Iran and Iraq's formal re-entry into the group's quota system, the London Center for Energy Studies said in its monthly oil report Tuesday.
The think tank said the producer group was upbeat as it marked the 50th anniversary of its founding in Baghdad in 1960. Unlike previous years, the Organization of Petroleum Exporting Countries since the 2008 economic downturn has demonstrated success in enforcing reduced production to prop up oil prices.
OPEC's solidarity, however, could unravel in response to events such as a war in Iran or Iraq's re-entry into OPEC's quota system that would require other members retreating on output to make room for increased Iraqi production, CGES said.
OPEC production cuts in 2009 helped to lift oil prices from about $30 a barrel to the current $70-$80 a barrel range. Crude oil prices climbed to more than $76 per barrel overnight in New York with the dollar index down 0.38 percent.
Crude oil has held steady for most of September but tentatively followed a monthlong rebound in stocks. Early in the month, crude oil prices hovered near $75 per barrel. On Tuesday morning, prices reached $76.29 per barrel, trading in a range from $75.65 to $76.37.
CGES said OPEC lead producer Saudi Arabia has the ability to keep prices in this range for the foreseeable future by manipulating the price of its exports relative to benchmark grades.
Despite a 3.5 million barrels a day cut in output, OPEC's aggregate oil export revenues are expected to be almost 25 percent up on the 2009 recession-hit level, CGES said. At around $625 billion, OPEC revenues should be almost exactly where they were in 2007, when output was 1 million barrels per day higher than the estimate for 2010, said the center, founded by former Saudi petroleum minister Sheik Zaki Yamani.
Aside from security fears in Iran and Iraq, CGES said, OPEC was also concerned about the pace of recovery in the global economy and fears that oil prices could weaken before winter.
"Things could change dramatically over the coming years," warned the center. "At some point Iraq will have to be brought back into OPEC's quota system, as its production capacity increases, a process that could be fraught with difficulties, if it is even partially successful at realizing its expansion plans.
"Other members will not concede market share easily, while Iraq and its foreign investors will both want a return on the billions of dollars poured into the country," CGES said.
Added to those pressures, growth in the OECD economies is expected to slow in the second half of this year, especially as government budget cuts come increasingly into play.
China's economic expansion is also slowing slightly as the government seeks to ward off inflationary pressures, CGES said.
Citing pressures on supply from political events or uncertainties elsewhere, CGES said, "There is also a very slim chance of a much larger loss of Middle Eastern oil production from some form of military action against Iran but the likelihood of this is seen as extremely low."
