OPEC, content with current oil price levels, agreed to keep the group’s crude output ceiling unchanged at least until June even as Libya, Iran and Iraq plan to increase exports in coming months.
Maintaining the 30 million-barrel-a-day target for the 12-nation Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, will ensure price stability, Venezuelan Energy Minister Rafael Ramirez said yesterday. There will be no need to reduce the cap at the next meeting, Libyan Oil Minister Abdulbari al-Arusi said.
“The big question is what OPEC will do if output from Libya and Iran returns to the market next year,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said yesterday. He said that will probably be discussed in June.
Some analysts warn that excess supply, including U.S. shale oil and a potential resurgence in exports from Iran, Libya and Iraq, may push prices lower next year if production cuts aren’t made. Brent crude has settled above $100 a barrel for all but five days this year.
Brent, the benchmark used to price more than half of the world’s crude, rose 2 cents to $111.90 a barrel as of 9:28 a.m. in London on the ICE Futures Europe exchange. It averaged $108.60 since the start of the year, compared with $111.68 in 2012 and $110.85 in 2011.
“We have rolled it over,” Saudi Arabia’s Ali al-Naimi told reporters at the end of three hours of closed-door talks in Vienna. “We are all satisfied.”
Iran wants to produce 4 million barrels a day after international sanctions are lifted, “even if it goes down to $20 per barrel,” Iranian Oil Minister Bijan Namdar Zanganeh said Dec. 3. The country pumped 2.65 million barrels a day in November and hasn’t produced 4 million since August 2008, according to data compiled by Bloomberg.
“We believe it is our right to try to increase our exports,” Zanganeh said. “I hope that all OPEC countries show wisdom, and when member countries, after limitation, return to the market, they understand they should open the doors for him, and not fight with him.”
Libya is confident other OPEC members will make room for its oil, al-Arusi said yesterday. The country’s output will rise to 1.5 million barrels a day in 10 days from 250,000, as all production issues have been resolved, he said. Iraq won’t cut its output or discuss OPEC quotas anytime soon, Iraqi Oil Minister Abdul Kareem al-Luaibi said.
OPEC will hold its next meeting June 11, Al-Naimi said. The group also agreed to extend Secretary-General Abdalla El-Badri’s term by one year, he said. The Libyan official has already served an additional 12 months after the group failed to select a successor from among three candidates last December.
The Centre for Global Energy Studies in London and Citigroup Inc. in New York have forecast that Saudi Arabia and its allies Kuwait, Qatar and the U.A.E. would have to reduce production by 1 million to 2 million barrels a day in 2014 to prevent a glut and keep prices stable.
Al-Naimi said before the closed-door meeting that 30 million isn’t too much for OPEC to target. He also said there’s no need for Saudi Arabia to cut its own production. The kingdom is OPEC’s biggest oil exporter and produced 9.65 million barrels a day last month, according to a Bloomberg survey. In the past two years, Saudi Arabia has adjusted its own production without any change to OPEC’s formal output ceiling.
“Considerable supply-side risks in OPEC” mean the group will probably need to cut output only by 600,000 barrels a day next year, which is within Saudi Arabia’s capability to do alone, according to Harry Tchilinguirian and Gareth Lewis-Davies, analysts at BNP Paribas SA.
“In addition to continuing problems in Nigeria, the planned incremental supply from Iraq may not emerge due to civil unrest, a recovery in Libyan output in the near term is unlikely, Venezuelan political unrest is a concern and we believe the re-emergence of Iranian barrels remains some way off,” the BNP analysts said in an e-mailed report.
The U.S. is pumping the most in almost a quarter-century amid surging production from shale formations. It will surpass Russia and Saudi Arabia to become the world’s largest oil producer for a few years from about 2015, the International Energy Agency said last month.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the U.A.E. and Venezuela.