US embassy cable - 03ABUDHABI2761

C O N F I D E N T I A L ABU DHABI 002761 
 
SIPDIS 
 
DEPT FOR NEA/RA, NEA/ARP, INR/EC, EB/IEP, EB/CBA 
USDOE FOR INT'L AFFAIRS -- COBURN, ALSO 
CALIENDO 
USDOC FOR 1000/OC/ 
USDOC FOR 4520/ITA/IEP/ONE 
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI 
4500/ITA/MAC/DAS/WILLIAMSON 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL 06/09/08 
TAGS: EPET, PGOV, BEXP, ENRG, ECON, EINV, TC 
SUBJECT: UAEG PREDICTS NO MAJOR MOVEMENT AT THE JUNE 
11 EXTRAORDINARY OPEC MEETING 
 
 
1.  (U) Classified by Acting DCM Thomas E. Williams, 
for reasons 1.5 (B) and (D). 
 
2.  (C) UAE Ministry of Petroleum Director of Economic 
Affairs and OPEC delegate Hamdan Al-Akbari told Acting 
DCM June 9 that he believes oil market supply and 
demand are balanced, current pricing is "adequate," 
and cuts in OPEC quotas are not required at this time. 
Almost all OPEC members which have the capacity to do 
so continue to overproduce their quotas, despite the 
last OPEC meeting's decision to raise quotas in hopes 
members would curb output in accordance with the new 
agreed output levels. (Note: Indeed, open source 
reports indicate that the UAE is overproducing its 
quota by as much as 130,000 barrels per day.  End 
note.)  Al-Akbari thought it very possible that the 
session would leave current quota levels untouched, 
but might once again call on members to bring actual 
production back into line with the agreed levels.  The 
Emirati official suggested that concern about non-OPEC 
market share would likely militate against any cut in 
quotas. 
 
3.  (C) According to Al-Akbari, the June 11 meeting 
was scheduled because of concerns about potential wild 
price fluctuations resulting from the Iraq war (A/DCM 
agreed that pessimists had predicted prices would 
reach 40 USD a barrel during the war, and might crash 
to 7-8 USD once the conflict ended).  While Iraq's 
future impact on the oil market remains a concern, Al- 
Akbari thought that the June 11 meeting would be 
guided more by stock levels in the United States and 
Europe, Venezuela's return to production, and would 
focus on potential near-term downward pressures on 
prices.  Iraq will likely become a major factor later 
this year when its oil capabilities and production 
schedule become clearer. 
 
4.  (C) A/DCM noted that with much of the OECD still 
struggling to sustain positive economic growth, and 
with the advent of the summer driving season in the 
United States, it would be helpful if OPEC could 
refrain from actions or statements that could 
jeopardize the modest recovery which appears to be 
underway.  While the oil intensity of OECD economies 
has diminished markedly over the past decades, oil 
prices continued to have a psychological impact on 
consumer and even market sentiment. 
 
Wahba