OPEC likely to keep output at present levels
VIENNA (AP) — Ministers from the OPEC oil cartel are expected to agree to a common position when they meet Wednesday, in sharp contrast to their last meeting in June which broke up in acrimony.
Then, OPEC ministers disagreed publicly on how much oil to sell the last time, with Saudi Arabia labelling it the worst ever meeting. This time, oil ministers are keen to paper over the cracks and repair OPEC's tattered image.
The expectation is that the 12-nation organization will likely come up with some kind of common position — whether that be setting a new target that matches current overproduction, or just issuing a statement saying present levels are meeting market demand.
Kuwait's oil minister Mohammed al-Busairi told the official state news agency KUNA Tuesday that the global oil market is balanced and that he hopes the meeting will "reach a consensus formula."
A joint stance is key for an organization that likes to see itself as the oil market's chief regulator — and which wants to avoid a repeat of the June meeting. With Iran and its allies rejecting a Saudi push to increase output and make up for lost Libyan supply at that gathering, the result was a free for all.
Supported by other Gulf members, the Saudis, OPEC's petroleum powerhouse, upped their production. Others also ignored quotas. And OPEC was left looking foolish.
Coming into Wednesday's meeting, OPEC is exceeding its three-year old production ceiling by 11 percent, with the Saudis making up much of that overproduction. Their estimated 10 million barrels a day is a third of overall output — and the most they've pumped since August 1981, according to the Energy Information Administration.
Over the past six months, the Saudis increased production by about 1.3 million barrels a day. They are the only OPEC nation with such spare capacity — and their decision to up output and keep a lid on prices after the June meeting, convincingly demonstrated that they continue to set OPEC policy.
At least for now, however, the lesson that the Saudis rule on oil output appears to have been learned by Iran and Venezuela, like Tehran a vocal price hawk.
Iranian Oil Minister Rostam Quasemi said last week that supply and demand are in synch — although he added that he sees prices over $100 a barrel as fair. And he said he will accept whatever an OPEC advisory panel recommends. Those experts favor the status quo — daily production of around 30 million barrels.
"Iran can see that they cannot do anything if they continue to oppose what the Saudis would like to have," said Ehsan Ul-Haq, senior market consultant at KBC Energy Economics.
The Saudis, in turn, are unlikely to press for any formal increase in output that would risk another abortive meeting.
In any case, they can up production unilaterally in case the world economy demands much more. But that is unlikely as long as the euro crisis continues to weigh on the global economy.
Oil prices hovered below $98 a barrel Tuesday reflecting such concerns. Benchmark crude has slumped from $103 last month amid growing investor worries that European leaders may be unable to get a grip on their debt crisis.
Associated Press writers Adam Schreck in Dubai and Alex Kennedy in Singapore contributed.