OPEC nations representing 94 percent of the group’s output said they were at ease with supply and demand in global oil markets before a meeting in Vienna to decide on a collective production limit.
Oil ministers from Angola, Ecuador, Kuwait and Venezuela all said they anticipated that the Organization of Petroleum Exporting Countries would roll over its existing ceiling of 30 million barrels a day. The meeting began at about 10:30 a.m. local time. Saudi Arabia, Libya, Nigeria and the United Arab Emirates said supply and demand are well matched. Iraq’s minister said there were indications the limit would be retained, while his Iranian counterpart also expected no change.
The 10 nations accounted for about 28.2 million barrels a day of output in May, while the group’s combined production amounted to about 30 million barrels, data compiled by Bloomberg show. Ministers from Algeria and Qatar declined to comment on the oil market or OPEC’s production.
“We don’t need to worry about anything, this is the best time for the market,” Ali al-Naimi, Saudi Arabia’s oil minister, told journalists in a briefing before the meeting began. “Everything is good, stable and everyone is happy.”
Brent oil, Europe’s benchmark, has traded above $100 a barrel for a year and is the least volatile ever. Still, there will be pressure on Saudi Arabia to produce record amounts in the second half of the year to cover disruptions in Libya, Iran and Iraq.
“OPEC has no incentive to change anything when it also has to deal with the uncertainty of Libya and Iran,” Olivier Jakob, managing director of Petromatrix, a Zug, Switzerland-based consulting firm, said in a report yesterday. “The production of OPEC is currently matching its official quota.”
Brent oil settled at $109.52 a barrel on the ICE Futures Europe exchange in London yesterday. The crude was last below $100 in intraday trading on June 24 last year. The 20-day historical volatility of Brent crude declined to 7.2 percent on June 2, the lowest since trading began in 1988, according to data compiled by Bloomberg News.
Ministers from the 12 OPEC nations are meeting to decide whether the official 30-million-barrel limit currently in place should be maintained.
While OPEC’s limit may be unchanged, the onus is growing on Saudi Arabia to meet demand. Iraq’s daily production contracted 8 percent since reaching a 35-year peak of 3.6 million barrels in February amid political disputes and pipeline bombings, according to the International Energy Agency. Militant fighters of the Islamic State of Iraq and Levant seized Mosul after battling government forces for control of the northern Iraqi city.
In Libya, output has fallen to a 10th of pre-conflict capacity because of protests at oil fields and strikes at export terminals. Iran may face in July an end to relief from international sanctions, which have reduced oil exports, if it cannot reach a broader deal on its nuclear program.
“There is enough oil in the market right now, and prices are balanced,” Iran’s Oil Minister Bijan Namdar Zanganeh said as he arrived in Vienna late yesterday. The country is increasing oil production and can boost output by 700,000 barrels a day within two months if international sanctions on its economy are lifted, he said.
Saudi Arabia, the world’s biggest oil exporter, may need to produce an unprecedented 11 million barrels a day of crude later this year, according to Energy Aspects Ltd., a London-based consulting firm. IHS Inc., another researcher, projects about 10.3 million while Societe Generale SA anticipates from 10.2 million to 10.5 million barrels a day in the third quarter.
“The onus will fall primarily on Saudi Arabia, which can pose upside risk to prices, if falling spare capacity coincides with further unplanned outages,” Amrita Sen, chief oil markets analyst at Energy Aspects, said in an e-mailed report June 9. “The real danger today is that the focus of the market is becoming so short-term that some of these structural changes are unnoticed.”