Jeff Bingaman: “With OPEC's third ministerial meeting of the year scheduled to begin on 10 September, followed by a Heads of State…”

“With OPEC's third ministerial meeting of the year scheduled to begin on 10 September, followed by a Heads of State gathering later in the month, the usual questions are being asked: whether, when and by how much should or will producers increase production? In a complicated market, most analysts expect OPEC to boost production. If OPEC goes with a modest increase, it would simply endorse what has already happened: August crude supply from OPEC (excluding Iraq) exceeded the 1 July target by 435 kb/d. Whatever the outcome, producers will likely take it upon themselves to increase production in excess of formal targets. Continuing high prices and extreme market volatility indicate that the market is fundamentally unbalanced. Stocks are stubbornly low even as economic activity has been strengthening globally. Low stocks are in large measure the result of 18 months of production restraint by producers in an effort to achieve price recovery on the heels of extremely low prices in 1998 and early 1999. At the margin, production restraint works, but it is an imprecise instrument. It can have profound and unforeseen side effects, including market instability and the distortion of economic behaviour.”