Crude oil price is on upswing after Organization of the Petroleum Exporting Countries (OPEC) kept output quotas unchanged. Back in the home turf, PSU oil companies have been losing significantly on the bourses. The benchmark Sensitive Index lost 0.3% in the morning trade. However, Praveen Kumar, Senior Consultant, Head-South Asia Oil and Gas Team, FACTS Global Energy feels that significant jump in crude from current levels is unlikely. In an interview to CNBC-TV18, Kumar said, “Saudi Arabia is likely to help in controlling crude prices.” Oil rose for a third day in New York today after the OPEC yesterday failed to reach agreement on production targets for the first time in at least 20 years and US crude inventories fell more than analysts forecast. Kumar, nonetheless, sees Brent prices cooling off to USD 100/bbl in the second half of 2011. He was quick to add that fall in OPEC spare capacity may tighten in market. Also read: Oil demand in H2 strong, OPEC must up supply, says Barclays Cap Below is the transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: What did you take away from inconclusive talks? What do you think it may do in the very near-term for crude prices? A: The OPEC meeting was mainly to check if there could be a raise in the production ceiling; the production ceiling is slightly less than 25 million barrels per day. Thanks mainly to the Saudi’s increase in production, it is already about 1.5 million barrels per day above the production ceiling. So, the reality was that even if they were to decide on raising the production ceiling, it would probably be to bring it to the current production levels. There were a lot of sceptics questioning as to what this would do to the market because in terms of quality even if OPEC were to raise the crude production, it would be the medium sour crude. Right now, because of the drop in Libyan production, it is the light sweet crude that are out of the market. That was one point. Second point was what it would mean to the OPEC spare production capacity because that is the reality. If there is a drop in the OPEC spare production capacity then that can lead to tightness in the market. The fact that nothing has happened to the production ceiling is a clear indication that first of all the sum of the OPEC producers are not happy to part with some of their spare production capacity. Also, they do not perceive the market to be tight in anyway. They are pretty comfortable with the amount of supply that’s there in the market, in fact the crude stock levels are high. Also, the demand is weak, if you look at the fundamentals. So, if you look at the supply demand fundamentals, there was no need for a raise in the production ceiling anyway. But, however, Saudi has mentioned that they would anyway go ahead and raise their production level. They are currently producing little less than nine million barrels per day and that would probably go up above nine million barrels per day. But the reality is that what this will eventually do is this will result in an oversupplied crude market. That’s what we believe. Today because the OPEC meeting not lead to anything, what we have seen is the sentiment has been bullish, crude prices have gone up by about USD 2 per barrel. Presently, Brent is going on at about USD 117-118 per barrel. The benchmark crude if you look at Dubai, Dubai is about USD 7-8 per barrel lower than Brent, which we feel is not correctly reflecting of what is going on in the market.

Source