OPEC Agrees to Higher Oil Target to Accommodate Libya, Iraq
OPEC decided to increase its production ceiling to 30 million barrels a day, the first change in three years, moving the group’s target nearer to current output as it grapples with rising exports from post-war Libya.
The new quota is for all members of the Organization of Petroleum Exporting Countries, including Iraq and Libya, and compares with actual November production from those 12 nations of 30.37 million barrels a day, according to OPEC estimates. The target will be reviewed at its next meeting on June 14 and replaces a previous target for 11 OPEC nations, excluding Iraq, of 24.845 million.
“We have an agreement to maintain the market in balance and we’re going to adjust the level of production of each country to open space for Libyan production,” Venezuelan Energy Minister Rafael Ramirez said in Vienna after OPEC’s conference ended today.
OPEC is raising its quota to more closely match current production while at the same time gauging the possibility of a slowing global economy and rising Libyan supply. Its last meeting in June broke up without consensus when six members including Iran and Venezuela opposed a formal push to pump more oil. Saudi Arabia and other Gulf nations went ahead anyway and increased supply to make up for halted Libyan exports.
No National Quotas
OPEC Secretary-General Abdalla el-Badri said the group won’t use individual, national production targets for its 12 member nations while Libyan oil exports are still recovering from the country’s armed conflict. Nigerian Petroleum Minister Diezani Alison-Madueke also said after the meeting ended that OPEC didn’t discuss national quotas.
“Ultimately, what matters is actual production and not notional quota levels,” Harry Tchilinguirian, head of commodity-market strategy at BNP Paribas SA in London, said by e-mail. The new limit makes sense given that it now includes Iraq, which hitherto was outside the quota system, he said.
“As such, the market be monitoring progress in the return of Libyan oil exports to the market and increases in Iraqi production” as foreign oil companies expand output at existing oil fields and develop new ones, he said.
Only three out of 26 traders and analysts surveyed by Bloomberg News Dec. 6-8, expected OPEC to raise the group’s quota. Of the remainder, 21 had predicted no change in official targets and two made no forecast on quotas, preferring instead to predict production levels.
“It is a loose agreement” with no new figures for individual member quotas, said Torbjoern Kjus, an oil-market analyst at DnB NOR ASA in Oslo, said in an e-mail. Kjus said Saudi Arabia is unlikely to cut its own production by as much as would be needed to keep the group total under 30 million barrels a day and “ we hence maintain our view that oil prices will fall below $100 a barrel during the first quarter of 2012.”
Brent crude for January delivery plunged $3.55, or 3.2 percent, to $105.95 a barrel as of 5:21 p.m. London time on the ICE Futures Europe exchange. Prices are up 12 percent this year after gaining 8 percent in 2010.
World Economy Concern
OPEC will need to produce 30.1 million barrels a day next year to balance world supply and demand, its secretariat forecast yesterday in a monthly report. World oil demand will rise 1.1 million barrels a day, or 1.2 percent, in 2012.
“We are faced with the prospect of a world economy which could swing either way in the coming months,” Iranian Oil Minister Rostam Qasemi, who is also president of OPEC until the end of this year, said in an opening speech at OPEC’s Vienna headquarters for the 160th ministerial conference. “It could enter a welcome period of sustainable economic recovery or return to a new downturn or even recession.”
Saudi Arabian Oil Minister Ali al-Naimi, whose country has boosted production to over 10 million barrels a day, said earlier today he expected a “great agreement” in OPEC today. He previously described OPEC’s June meeting as the worst ever.
OPEC last set a quota in December 2008 at a meeting in Oran, Algeria, when the group announced record supply cuts. The 11 members that are subject to limits last month pumped 2.81 million barrels a day more than the 24.845 million-barrel agreed ceiling, a Bloomberg survey showed. Iraq is not bound by quotas.
All 12 OPEC members collectively produced 30.37 million barrels a day last month, according to OPEC’s own monthly report published yesterday. Excluding Iraq, the 11 nations previously subject to quotas pumped 27.69 million barrels a day, according to OPEC, which uses secondary sources, such as analysts and news agencies, for its survey.
Earlier today, Venezuela’s Ramirez had contradicted other OPEC members by saying that the organization wasn’t discussing a new higher production limit of 30 million barrels a day. He reiterated his view that those OPEC members that had increased output when Libyan supply slowed, should reduce their output as the nation’s exports recover.
To contact the editor responsible for this story: Stephen Voss at firstname.lastname@example.org
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.