The Organization of Petroleum Exporting Countries kept its production ceiling unchanged, as concern that global growth is shrinking outweighed calls by some members for supply cuts to stem sliding prices.
The 12-member group agreed to leave the limit at 30 million barrels a day, Youcef Yousfi, Algeria’s Minister of Energy and Mines, said today in Vienna at the end of the producer group’s first meeting of the year. Venezuela, Angola and Ecuador were among nations that backed keeping the quota unchanged prior to the decision. Saudi Arabia, whose minister, Ali al-Naimi, had said this week he might favor a production increase, said he was “happy” with today’s outcome.
OPEC has been exceeding its output limit this year as the prospect of sanctions against Iran, the group’s second-largest member, pushed Brent oil in March to the highest level since July 2008. Since then, concern that Europe’s debt crisis will erode fuel demand has driven the crude back below $100 a barrel, a level favored by Saudi Arabia, Venezuela and Libya.
“This doesn’t hide the elephant in the room, which is ultimately the upcoming full implementation of sanctions on Iranian oil,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London. “These in turn imply that actual production from the cartel will continue to remain above the official ceiling.”
Brent futures for August settlement traded at $97.12 a barrel at 8:02 p.m. on the ICE Futures Europe exchange in London, down about 24 percent from this year’s high of $128.40.
All 20 analysts and traders surveyed by Bloomberg News before the meeting forecast the group would leave the quota unchanged. OPEC will meet again on Dec. 12, al-Naimi said.
Today’s meeting was the first in a decade at which OPEC has refrained from reducing supplies while prices have been tumbling. The group has agreed to cuts at every meeting in the past 10 years that coincided with a price drop of more than 10 percent in the preceding three months, data compiled by Bloomberg show.
Members were asked to cut production in excess of the agreed ceiling, OPEC Secretary-General Abdalla El-Badri said at a press conference at the end of the meeting.
In taking this decision, the group said in its final communique that “member countries confirmed their readiness to swiftly respond to developments that might place oil market stability in jeopardy.”
Iran, Venezuela, Iraq, the United Arab Emirates, Angola, Libya and Ecuador said global crude supplies are already excessive. Saudi Arabia pumped 10.1 million barrels a day in April, the highest in three decades, the International Energy Agency said yesterday in a report. That fell to 10 million barrels last month, according to IEA estimates.
Iran sees the risk of a “serious decrease” in oil prices because of increased production from Saudi Arabia, Mohammad Ali Khatibi, the nation’s governor to OPEC, said May 29 in comments posted on Shana, the Iranian Oil Ministry’s news website.
OPEC pumped 31.86 million barrels a day last month, the Paris-based IEA said. Demand for OPEC’s crude will rise to 30.9 million barrels a day in the second half of this year, compared with 29.8 million from January to June, it said.
Venezuela wants a stable oil at above $100 a barrel, Ramirez said yesterday. Libya’s Oil Minister Abdul-Rahman Ben Yezza also referred to that price as his preferred “base line.” Al-Naimi had cited that level as a target on a visit to Adelaide, Australia, on May 13.
The decision on a successor to El-Badri has been postponed and will be discussed at the next meeting, al-Naimi said.
“The four are excellent candidates and that’s why it was difficult to choose one of them,” El-Badri told reporters after the meeting.
The 12 members of OPEC are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.