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OPEC Seen Considering Raising Crude Output Up to 1.5 Million Barrels a Day

OPEC members gathered to review their target for oil output amid rising speculation that Saudi Arabia, the group’s biggest producer, is seeking an agreement to boost production by as much as 1.5 million barrels a day.

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s crude, is meeting in Vienna as fighting in Libya shuts off the bulk of supplies from Africa’s third-largest producer and oil hovers at almost $100 a barrel. Crude prices at current levels could derail a global economic recovery, the International Energy Agency’s Chief Economist Fatih Birol told reporters today in Oslo.

“Saudi Arabia and other key members of OPEC, with the usual exceptions of price hawks Iran and Venezuela, appear to be leaning toward a quota increase because they are concerned about the negative impact of high prices on GDP growth and, ultimately, on oil-demand growth,” Michael Wittner, the New York-based head of oil-market research at Societe Generale SA, said today in a note.

OPEC is about 65 percent likely to raise its production target tomorrow, with an increase of as much as 1.5 million barrels a day, Wittner said. The 12-member group has kept its ceiling at 24.845 million barrels a day since December 2008.

Crude for July delivery slid as much as 68 cents to $98.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.17 at 9:58 a.m. in London. The contract yesterday fell $1.21, or 1.2 percent, to $99.01. Prices are up 38 percent the past year.

Managing Oil Prices

Saudi Arabia is probably “keen” to keep oil prices below $100 a barrel, said Ian Henderson, who manages $10 billion at JPMorgan Chase & Co. “They don’t want to have the price running away,” Henderson told Francine Lacqua on Bloomberg Television.

Saudi Arabian Oil Minister Ali al-Naimi declined to answer reporters’ questions today in Vienna about the group’s discussions and likely decision.

The global crude market would “welcome” increased oil production from OPEC, Vitol Group Chief Executive Officer Ian Taylor said after attending the Asia Oil and Gas Conference in Kuala Lumpur.

“We’ve lost Libya, that’s sweet oil that theoretically would be good to replace,” Taylor told reporters. “The markets are in small backwardation, which would suggest there’s just about enough oil. Stock levels aren’t bad, I could not say the market is incredibly tight.” Taylor was referring to the market for Brent crude, in which cargoes for immediate delivery are more expensive than those for later dates.

Missed Libyan Supply

A rebellion against Libyan leader Muammar Qaddafi has cut supplies from the North African country by almost 90 percent, according to Bloomberg estimates. Libya produces the light, low- sulfur crude favored by refiners.

OPEC will need to raise its production target by as much as 2.5 million barrels a day or risk that prices will move higher, according to a report from Johannes Benigni, chairman of consultant JBC Energy GmbH in Vienna, received by e-mail yesterday.

“If OPEC doesn’t increase supply sufficiently, it would be a tacit communication to the market that $100-plus oil is acceptable,” Benigni said.

OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the group’s quota system.

To contact the reporters on this story: Ayesha Daya at adaya1@bloomberg.net.

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net.

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