VIENNA/NEW YORK – Divisions within OPEC signal the group will probably keep its crude production ceiling unchanged today (Thursday) in its regular ministerial meeting in Vienna following a 25 percent slump in crude prices since March.
Iran, facing a European Union embargo on its oil exports, and Venezuela have been joined by Iraq, Angola, Libya and Ecuador in saying that global crude supplies are already excessive. Others in the group felt there may be a need to boost the target.
Leaving the production quota unchanged may be the likeliest compromise because it allows smaller producers to protect revenue after Brent crude’s 23 percent decline since March, while preventing a price rally that would curb economic growth.
"Oil demand remains high, but so do fears of the economy and that is going to weigh on members’ ability to make a decision on the quota," Jason Schenker, the president of Prestige Economics LLC, a commodity researcher in Austin, Texas, said in an interview in Vienna yesterday. Brent will average $120 a barrel next year on forecasts of global growth, he said.
World oil prices were mixed on Wednesday as traders looked ahead to an uncertain outcome to OPEC’s latest production meeting.
New York’s main contract, light sweet crude for delivery in July, dropped 49 cents in midday trading Wednesday to $82.83. a barrel.
Brent crude, which is used to price international oil and to make gasoline in much of the United States slipped 25 cents to $96.72.
Brent crude, a benchmark contract for more than half the world’s oil, rose as high as $128.40 on the London-based ICE Futures Europe exchange March 1.
OPEC should raise its output ceiling by 500,000 to 1 million barrels a day to keep prices at current levels amid Europe’s debt crisis, two delegates from Middle Eastern member countries said.
Opposition from other nations, such as Iran and Venezuela, will probably result in the group’s collective output limit remaining unchanged, according to the delegates, who declined to be identified because a final decision will be made tomorrow.
Prospects for Europe’s economy are "not so positive" and will determine short-term market fundamentals, Saudi Oil Minister Ali Al-Naimi said Wednesday in Vienna. He said June 11 that there may be a need for a higher output ceiling.
Traders and analysts surveyed said they expect the group to keep its official daily production ceiling at 30 million barrels a day.
OPEC is collectively pumping 1.58 million barrels a day more than its target, according to a monthly report from its secretariat.
"There is a big surplus in supply, and there is a big decline in prices, and this does not serve either the producers or the consumers," Abdul Kareem Al-Luaibi, Iraq’s oil minister said. – SG/Agencies