London (Platts)--25Jun2009

The world oil market is in a "delicate and precarious state," oil
producer club OPEC said Thursday, adding that it was ready to move quickly to
adjust crude production levels if such action proved necessary.

A commentary in the latest issue of the OPEC Bulletin said oil prices
were now "closer to levels that could support sound investment plans for
future production" but were not justified by fundamentals of supply and
demand.

It noted that OPEC's own crude basket, which had stood at $44/barrel at
the start of the March 15 ministerial meeting, had climbed above $70/b since
the most recent conference on May 28 despite supply continuing to be greater
than demand and OECD commercial stocks remaining well above five-year average
levels.

OPEC said that while higher prices were needed to maintain investment in
capacity so that post-recession rising demand can be met, the current price
strength was being driven by "the volatile behaviour of speculative forces
that are once again prominent in the market."

"Prices driven up by speculation can just as easily fall through
speculation, as we saw last year, to our cost. They can also soar to untenable
levels, as again witnessed in 2008," OPEC said.

"As a result of all this, the oil market is now in a delicate and
precarious state, and a comparatively minor impulse could tip it one way or
the other."

OPEC said it was adopting "a cautious, wait-and-see attitude." But, it
added, "we are prepared to act--at short notice, if necessary--by adjusting
our production agreement in a pragmatic, calculated manner, if our constant
monitoring of developments suggests that this will be in the best interests of
market order and stability."

Ministers rubber-stamped in March and May the 4.2 million b/d of output
cuts agreed late last year. But while the cartel has maintained its official
24.845 million b/d output target, actual production has risen over the past
two months after several months of steady falls as oil prices have recovered.

--Margaret McQuaile, margaret_mcquaile@platts.com