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OPEC Keeps Output Quota as El-Badri Stays in Top Job

OPEC kept its production target unchanged for a second time this year as the group’s members judged prices are sufficiently high amid forecasts that supply will outpace demand for their crude in 2013.

“Everything will stay as it is,” Saudi Arabian Oil Minister Ali al-Naimi said in Vienna. “We respond to customer demand. Whatever the customers want, we will give them.”

The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil, maintained its official quota at 30 million barrels a day, a level it now exceeds by about 1 million barrels a day. It failed to elect a new secretary-general. Brent crude, a benchmark contract for more than half the world’s oil, is heading for its highest-ever annual price, averaging $111.78 a barrel this year.

“Most member states in the exporting group are happy with the current market balance and price levels,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said by e- mail. “The market remains well balanced with plentiful supplies ready to counter any short term disruptions or geopolitical risk jitters.”

OPEC’s 12 members are competing with a surge in shale oil output in the U.S., which last year bought 21 percent of group’s exports, at a time when the world economy may deteriorate yet again. Iran, formerly the group’s biggest producer after Saudi Arabia, faces tougher U.S. sanctions and a European Union ban on its crude because of the country’ nuclear program and has seen its output slip to fifth place within OPEC.

Oil Revenue

Production in Iraq is surging this year, helped by investment from foreign oil companies from BP Plc to Royal Dutch Shell Plc, while Libyan oil exports are recovering after last year’s armed conflict. High prices are handing OPEC members more than $1 trillion in annual revenue for a second straight year.

All 18 analysts surveyed by Bloomberg News before ministers met today at OPEC’s Vienna headquarters had predicted that the group would leave its production target unchanged. Analysts at Societe Generale SA and the London-based Centre for Global Energy Studies said OPEC will need to consider supply cuts next year to prevent prices falling. Brent crude rose 1.5 percent to $109.63 at 3:27 p.m. in London on the ICE Futures Europe exchange. The commodity will average $110 next year, according to the median forecast of 29 analysts tracked by Bloomberg.

OPEC set its current limit on Dec. 14, 2011, putting it into effect in January. The target, which doesn’t specify individual quotas for member countries, remained unchanged at the group’s previous meeting in June.

Reining Back Supply

Saudi Arabia has been unilaterally reining back supply in recent months, curbing crude output to a 13-month low of 9.67 million barrels a day last month, according to a monthly report from OPEC yesterday that cited secondary sources for its data.

In its own direct communication to OPEC, Saudi Arabia said November production was even lower, at 9.49 million.

Total production from all 12 OPEC nations slid to an 11- month low of 30.78 million barrels a day last month, the OPEC report showed. That’s still more than the group’s official quota and about 1.03 million barrels a day more than the projected average demand for OPEC crude next year, in part because of rising supply from outside the group, the report said.

“We are seeing some challenges for 2013, like the U.S. fiscal cliff and the debt crisis in Europe,” OPEC Secretary- General Abdalla El-Badri said in a press conference after today’s decision. “But we see some light at the end of the tunnel by the end of 2013, with China growth and a solution of the fiscal cliff situation in the U.S.”

Shale Revolution

U.S. crude oil production will climb 640,000 barrels a day to 7.1 million next year, the highest level since 1992, the Energy Department said yesterday in its monthly Short Term Energy Outlook.

While Al-Naimi told reporters he wasn’t concerned by burgeoning U.S. production from shale deposits, earlier in the day United Arab Emirates Oil Minister Mohammed Al-Hamli said: “we are very concerned. We will protect our interests.”

Ministers decided to keep El-Badri in the Secretary-General post for one more year, having failed to agree on replacement candidates fielded by Saudi Arabia, Iraq and Iran. El-Badri, a former Libyan oil minister, was due to step down from his second three-year term at the helm of the OPEC Secretariat at the end of this month.

“We have an experienced secretary-general in position, extending it one year is a very, very good decision,” al-Naimi said.

The producer group, founded in 1960, comprises Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC will meet next on May 31 in the Austrian capital.

To contact the reporters on this story: Grant Smith in Vienna at gsmith52@bloomberg.net; Fred Pals in Vienna at fpals@bloomberg.net; Nayla Razzouk in Vienna at nrazzouk2@bloomberg.net

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

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