ABU DHABI, United Arab Emirates OPEC powerhouse Saudi Arabia kept consumers guessing on the eve of a key meeting of the group, with its oil minister refusing to tip his hand Tuesday on whether he favors boosting production to reassure nervous markets.
Up to a few days ago, the markets were overwhelmingly betting that OPEC decision-makers would opt to increase output at their meeting in Abu Dhabi in attempts to cool red-hot prices that closed at a record $98.18 a barrel on Nov. 23.
Comments from OPEC members boosted such sentiment, with ministers from Iraq, Indonesia, Nigeria and Kuwait saying they're open to increases, and unnamed OPEC officials telling Dow Jones Newswires last week that a hike of up to 750,000 barrels a day could be in the cards.
That sent oil prices tumbling in anticipation of such a move, along with concerns for the health of the U.S. economy. By Friday, oil was down by nearly $10 the biggest correction ever in nominal terms over a week, and down 10 percent compared to the previous Friday.
Crude continued its slide Tuesday, with light, sweet crude futures down 92 cents to $88.39 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.
The Organization of Petroleum Exporting Countries is keen on maximizing revenues while seeking an image as a responsible regulator of unstable markets. The recent downturn thus, has toughened the choice of what to do when OPEC's 13 oil ministers meet in Abu Dhabi on Wednesday.
OPEC President Mohamed Al Hamli, who is also oil minister for the United Arab Emirates, reaffirmed his view Tuesday that there is ample oil supply in global markets. He told WAM, the United Arab Emirates news agency, that "fluctuation of prices is a result of several factors that don't have anything to do with market fundamentals." Instead, he was quoted as blaming speculators and geopolitical tensions.
Ministers from Venezuela and Qatar also have recently suggested there's no need to boost supplies.
But the Saudis whose views carry great weight because they are responsible for almost a third of OPEC's total output remained publicly uncommitted a day ahead of the meeting.
"All options are open," Saudi oil minister Ali Naimi told reporters Tuesday, adding the group "will look at all the information" before reaching a decision.
A delegate to the meeting suggested that chances of an increase above 500,000 barrels a day were diminishing from a few days ago, with the most likely options now either settling for the status quo or boosting output by a half-million barrels daily. He did not want to be identified because he was not authorized to comment to media.
Reduced demand growth forecasts from both OPEC and the International Energy Agency are pushing prices downward. Also, a half-a-million barrel OPEC production hike from last month is starting to kick in, alongside expectations of increased output from the United Arab Emirates with the end of refinery maintenance there.
Still, a production hike seems most likely with prices still up more than 50 percent from a year ago, energy-hungry nations like the U.S. pressing for more supplies and OPEC keen to be absolved of any suggestion it is more interested in profits than an orderly market.
But ministers will want to tread carefully they remember the disastrous fallout from their decision to raise output just before the 1997 Asian financial crisis only to see oil prices plummet from $20 to $12 a barrel.
Johannes Benigni, head of PVM Oil Associates in Vienna, Austria, said "a decision not to raise outputs would not be a crisis, although a little room to maneuver" in terms of available supply is always good during the high-demand Western hemisphere winter season.
Still, with markets jumpy, most analysts are betting on a decision to open the oil spigots wider at Wednesday's one-day meeting.
Analyst John Hall, of John Hall Associates in London, said a decision to increase exports would soothe a market skittish over Middle East tensions, as well as forecasts of cold weather in the U.S. Northwest.
"It just takes one thing to go wrong, and the price goes up," he said. "But the moment OPEC says they will increase output, prices will come down."
The 10 OPEC countries bound by quotas now pump out an estimated 27.2 million barrels a day. OPEC's total production is 31.5 million barrels daily, factoring in Iraq and Angola, which are not under output restraints. OPEC oil accounts for about 40 percent of the world's needs.