OPEC Unlikely to Change Production Quota
Sunday September 10, 12:10 pm ET
By William J. Kole, Associated Press Writer
Key Oil Ministers Say OPEC Unlikely to Change Production Targets Despite High Prices
VIENNA, Austria (AP) -- High crude prices are not putting the brakes on global economic growth, and there is no reason for OPEC to change its production targets, key oil ministers said Sunday on the eve of a key meeting of the cartel.
Mohamed Bin Dhaen al-Hamli, the United Arab Emirates' energy minister, told the pan-Arab newspaper Al-Hayat that the world economy was still growing briskly, "showing that the impact of oil prices is limited" despite concerns that stubbornly high prices could trigger a slowdown.
With prices hovering around $67 a barrel and supplies outstripping demand, the 11-nation Organization of Petroleum Exporting Countries almost certainly will keep its current production quota steady when it meets Monday in Vienna, al-Hamli said.
"Inventories are comfortable, prices are coming down and nobody, I hope, is concerned about shortages of supply," said Ali Naimi, oil minister of Saudi Arabia, the world's No. 1 oil exporter. "We are very happy with the situation."
Although prices are more than $10 a barrel off their July highs, economists concede that jittery market sentiment -- fueled by pipeline problems and political turmoil in the Middle East -- does not leave OPEC with much choice. Cutting output would drive prices even higher, and pumping more is not an option for most members already producing at maximum capacity.
OPEC's production target is now 28 million barrels a day, excluding Iraq, which is not part of the group's quota system. The cartel meets about 40 percent of the world's demand for crude.
Oil has been edging lower since light sweet crude hit a record $78.40 a barrel on July 14, two days after fighting erupted in Lebanon. It dipped below $67 a barrel on Friday as traders focused on slackening demand and rising supplies.
Global production has taken a hit from BP's leak-prone Alaskan oil pipelines, outages in Iraq and Nigeria, Africa's biggest producer -- where militants have attacked oil infrastructure -- and concerns over Iran's escalating nuclear standoff with the U.N. Security Council.
OPEC President Edmund Daukoru, conceding the cartel has been "more or less on autopilot," said members would take a hard look at the latest trends.
"It's a time to see whether we need a good, fresh outlook," Daukoru, who doubles as Nigeria's oil minister, told reporters Sunday. "We have to look very, very carefully at what's going on with prices."
But supplies remain ample. Al-Hamli said OPEC maintains about 2 million barrels a day of spare capacity, and stocks are high elsewhere; the U.S. Department of Energy said last week that inventories have hit their highest levels since 1998.
"Prices are going down, but this is a correction. What we are seeing is a fluctuation," Shukri Ghanem, the chairman of Libya's National Oil Corp., said Sunday. "We are working in a free market, and we expect prices to go up and down."
Eshan Ul-Haq, chief analyst at PVM Oil Associates in Vienna, said he did not expect the cartel to do anything significant until prices drop closer to the $50-per-barrel benchmark that many members contend is optimal.
That will not happen this year, but it could in 2007 if production from non-OPEC nations such as Angola, Brazil and Caspian Sea countries like Azerbaijan rises significantly, as expected, and puts pressure on prices, Ul-Haq said.
Analysts said it was probably too early to gauge the impact of a newly discovered petroleum pool beneath the Gulf of Mexico, which experts say eventually could yield anywhere from 3 billion to 15 billion barrels.
Matthew Cordaro, an energy specialist and business professor at Long Island University in New York, said the discovery "may put a little damper on all the talk about the need for renewable energy sources and conservation."
OPEC members also were expected to discuss whether to appoint a new secretary-general, a mostly symbolic post now held by Nigeria.
Iran has been lobbying for the job, arguing that as the cartel's No. 2 producer, it has a right to a top leadership slot. OPEC has shut Iran out of the position since the 1979 Islamic Revolution.
OPEC: opec.org
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