OPEC seen keeping current output ceiling
OPEC seen keeping current output ceiling
Dow Jones
Manama, Bahrain
The Organization of Petroleum Exporting Countries (OPEC) would
most likely decide to maintain its current production ceiling of
26 million barrels a day when it next meets on Wednesday in
Vienna, the weekly Middle East Economic Survey (MEES) reports in
its Monday edition.
Such a decision would give OPEC oil ministers room to monitor
critical global oil stock levels as the northern hemisphere
economies move out of the summer seasonal demand patterns and
into pre-winter stock-building, the report said.
MEES said the price surge to near US$50 a barrel for nearby
crude futures in August wasn't supported by fundamentals but was
more a reaction to a pattern of sabotage against oil
installations in Iraq, repeated news on limited spare capacity
with OPEC and concerns about Russian production.
OPEC continued to overproduce its quota in the last few months
in an effort to cap high oil prices, but now has limited room for
maneuver as production is near capacity, MEES said.
"Ministers are faced with a limited set of options when they
meet for their regular biannual ministerial meeting on Sep. 15 in
Vienna," it added.
A cut in production quotas can be easily ruled out with West
Texas Intermediate crude still above $40 a barrel, while any
sustained decline in prices would likely first be tackled by a
cut in excess production over and above quota levels, MEES said.
It said an increase in quotas in an attempt to further
pressure prices lower would yield little benefit, especially
since this would leave at least two countries, Venezuela and
Indonesia, producing below quota and could re-ignite what some
view as an untimely return to the debate about individual quota
realignment.
However, "with prices having backed off around $7/bbl since
the record highs of August, the pressure on ministers to make a
new gesture on supply at the Vienna meeting has also eased," it
said.
Meanwhile, MEES expects OPEC ministers won't endorse any
change in the group's target price band of $22-$28/bbl at
Wednesday's meeting because there is very little appetite among
major producers to alter the band at this stage.
MEES said current price volatility and the limited visibility
on what sort of range oil prices will ultimately settle within
would make it difficult for the ministers to alter the current
range.
"What's the use of changing the price band if you are unable
to sustain it in the future," MEES quoted Algerian Oil Minister
Chakib Khelil as saying.
Khelil said any change in the price band would need to reflect
real structural change in the market.
MEES noted that an OPEC committee is studying long-term
strategy, including discussion of the target price band.