A sign board above the oil futures pit at the New York Mercantile ExchangeCHIP EAST
OPEC should be cautious when it meets this month decide its oil output policy as it needs to balance signs of economic recovery and abundant supplies, the group's secretary general said on Thursday.
The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, meets in Angola Dec. 22. Several members, such as Algeria, Kuwait and Qatar, have indicated OPEC may hold output steady.
"We are seeing signs of an economic recovery, largely driven by developing countries such as China and India, yet we still need to remain cautious and take things slowly," OPEC's Abdullah al-Badri told Reuters in an email response to questions.
"There is no doubt that the oil market remains complex and difficult to gauge. We continue to see price volatility, which makes it difficult to judge what is really happening. Oil supplies are abundant."
Oil prices reached $82 (U.S.) a barrel in October, the highest in a year, in a rally many see as driven by expectation of economic recovery and a weak U.S. dollar rather than a tighter oil supply and demand balance.
OPEC agreed to curb its output by 4.2 million barrels per day late last year. It has kept official policy unchanged at meetings this year, but industry estimates show actual OPEC production is gradually rising.
Mr. Badri said oil inventories remain above their five-year average and there were 165 million barrels of crude and products floating at sea - equal to almost two days' global demand and more than some estimates.
He did not answer directly the question of what OPEC would decide in Angola, saying it was "somewhat difficult" and the group's oil ministers would make the final decision.
Mr. Badri said oil prices, trading at more than $76 a barrel Thursday, included a speculative premium and repeated his view that too much speculation was a bad thing.
"Extreme speculation causes extreme volatility, which is not beneficial to either oil producers or consumers," he said.
The OPEC official also sounded a warning about the Copenhagen talks Dec. 7-18, which he is planning to attend. Ministers, officials and some heads of government are meeting to put together a successor to the Kyoto Protocol.
"It is important that any agreement reached in Copenhagen is balanced, inclusive, fair and equitable," Mr. Badri said.
Since OPEC includes many of the world's top oil producers, it is worried about the impact efforts to curb fossil fuel use could have on their economies.
Kyoto had included the pledge of financial assistance and technological help for developing countries and failure to comply could be fatal for the talks.
"A departure from these agreements would be a disaster for the Copenhagen conference," he said.