No plan to change oil output

No plan to change oil output

Agence France-Presse, Vienna

OPEC is meeting in Algiers next week with oil prices high and with no change in production expected until the cartel can see how reduced demand in the spring will affect the world market.

The Organization of Petroleum Exporting Countries (OPEC) "will not have any desire to do anything (ahead of Tuesday's meeting) because prices are high and production levels are high. It's the best of all worlds for them," said Leo Drollas, an analyst at the London-based Center for Global Energy Studies, in a telephone interview.

"The key question is what happens next. The next OPEC meeting is in March. That will give them an advance view to where the market is heading," Drollas said.

The 10 nations in the OPEC quota system are committed to maintaining a certain oil price, even if it costs them market share, analysts said.

This is done by cutting production when prices flag.

"Most of people who do supply and demand think there will be an an oversupply in the second quarter of this year," Adam Sieminski of Deutsche Bank in London said.

He said OPEC would like to cut now, ahead of spring, from its current production ceiling of 24.5 million barrels per day (bpd) but that this would "be politically bad," since prices are high, at roughly US$30 a barrel, a figure higher than the OPEC target of $22-$28 per barrel.

This is at a time when freezing weather in the United States is driving up the demand while supplies and stocks remain tight.

"I think they'll do nothing until the price goes down and then call a quick meeting," Sieminski said about OPEC, although the cartel has shown it can hatch surprises at its ministerial-level meetings.

Sieminski said he expected an eventual cut by OPEC in its ceiling of one to two million bpd, a ceiling the cartel's members are already exceeding by almost two million bpd.

In Davos, Switzerland, earlier this month, Saudi Oil Minister Ali al-Nuaimi said: "As far as prices are concerned, we, OPEC, particularly Saudi Arabia, would like to see the prices between $22 and $28, around 25."

OPEC has to take production from non-OPEC producers, such as oil giant Russia which is second only to Saudi Arabia in oil output, into account.

Sieminski said that "as long as oil prices are high none of the usual operators such as Russia and Mexico are going to offer any production cuts."

OPEC's battle to maintain strong prices puts itself in a paradoxical position where it must cut production to keep them up, and in doing so lose market share to non-OPEC states, analysts said.

OPEC produced 28 million bpd in 1998 and only 25 million bpd in 2002.

Sieminski said "a lot of people in OPEC would like $50 a barrel if they could get it. But if there were such a price, OPEC would lose market share significantly year after year."