LONDON (Dow Jones)--The decision by the Organization of Petroleum Exporting Countries to maintain its current output policy Thursday could lead to a sharp spike in oil prices, warned the London-based Centre for Global Energy Studies Monday.
“OPEC's complacency in Vienna has set the scene for another upward price spiral," said the CGES in its monthly oil report.
Ahead of the peak summer demand season, the group warned that "OPEC needs to raise output to let refiners boost transport fuel stocks in 2Q...Refiners will need to boost runs rapidly and to do so they will need more crude than is currently available," said CGES.
Recent sharp drawdowns in global crude oil and product inventories are "likely to leave refiners short of supplies as they bring their plants out of turnaround in the coming weeks and begin to boost runs," the CGES said.
The gasoline market may also tighten up during the peak season if inventories do not recover soon. U.S. gasoline stocks have started to fall several weeks before the seasonal norm, and crack spreads, or the profit a refiner can make from a barrel of oil, have risen sharply to approach last year's peak levels.
In 2006, OPEC member nations pledged to shore up falling oil prices by reducing their oil output by 1.7 million barrels a day. CGES estimates OPEC has successfully cut production by 1.4 million barrels a day since the recent peak in August, 2006.
However, "strong weather-related oil demand has left OPEC's output cuts looking excessive," CGES said.
Source: Lananh Nguyen, Dow Jones Newswires; +44-20-7842-9479; lananh.nguyen@dowjones.com