The Organization of Petroleum Exporting Countries Monday warned that further deterioration in the European economy could knock the oil market off its balanced trajectory in 2012, but largely ignored tensions between Iran and the West that have boosted oil prices in recent weeks.
OPEC acknowledged that "geopolitical concerns in the Middle East helped change the course of the market," and raised oil prices. It also warned that higher fuel prices could further reduce oil demand in 2012.
But the exporters' group otherwise made no mention of what has been one of the drivers of oil prices in recent weeks—the standoff between Iran and the West that threatens to disrupt oil trade, either through tighter sanctions or conflict in the waterway that exits the Persian Gulf.
OPEC's lack of comment on the Iranian situation highlights its difficult position on the issue. The escalating crisis threatens to pit one OPEC member against another, not long after the group made great efforts to restore harmony at its December meeting following an acrimonious split in June.
Internal tensions grew over the weekend between OPEC's two largest producers as Iranian officials reacted angrily to perceived Saudi promises to fill the gap left by a ban on Iranian oil.
On Saturday, Saudi Arabia's Oil Minister Ali Naimi, when asked about a European Union proposal to ban imports of Iranian crude and seek alternative supplies, said: "Whatever customers want we will give it to them."
Speaking on Sunday, Muhammad Ali Khatibi, Iran's OPEC governor, said that any pledges from Gulf countries to replace its oil exports because of sanctions would make them complicit with Israeli pressure.
Mr. Naimi soon clarified his comments. "We never said that Saudi is seeking to compensate Iran's oil production in case it is embargoed, but we said we are willing to meet any rise in demand from our customers," he told Saudi newspaper Al Eqtisadiah later Sunday.
Aside from the Iran tensions, OPEC painted a picture in its monthly report of an oil market that was evenly balanced. OPEC expects demand for its crude to be 30.15 million barrels a day in 2012, close to the new 30 million barrel a day production ceiling it agreed in December.
It warned that a further economic decline in Europe could potentially have a spillover effect in emerging economies and push oil demand lower, but otherwise left its 2012 demand growth forecast unchanged at 1.1 million barrels a day.
OPEC produced 30.8 million barrels a day of oil in December, the highest level since October 2008, the report said. This implies some members will have to cut production to come in line with the new 30 million barrel a day production ceiling agreed in December.
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