OPEC Keeps Output Target Unchanged, Content With $100 Oil

OPEC kept its production target unchanged for a third consecutive time, signaling that crude prices at about $100 a barrel are sufficient to buoy members’ revenue as the global economy recovers.

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, maintained its group ceiling of 30 million barrels a day at a meeting today in Vienna, Venezuelan Oil Minister Rafael Ramirez told reporters after the conference finished. The 12-nation group will next gather on Dec. 4, he said.

The producer group risks delaying an organized response to the challenge of its own burgeoning supply and that of non members and should pare output back to the agreed target to prevent prices from falling later this year, according to Citigroup Inc. and Societe Generale SA. Iraq, the biggest producer behind Saudi Arabia, is expanding production with the help of foreign companies including BP Plc, while a growing supply of U.S. shale oil threatens to displace some of OPEC’s own crude sales.

“There is a consensus within Saudi Arabia and its allies that $100 a barrel is a good price,” Abhishek Deshpande, an analyst at Natixis SA in London, said in an e-mail. “If OPEC oversupply does start impacting oil prices negatively, we can expect Saudi Arabia to proactively reduce output to provide support to oil prices this year.”

OPEC Basket

Brent, which is used to price more than half the world’s crude, has lost 8.5 percent this year and traded near $102 a barrel today on the ICE Futures Europe exchange. The OPEC basket price, which represents the group’s export crudes, was at $99.77 a barrel yesterday, according to OPEC’s website, and has averaged about $106 so far this year.

OPEC kept the output target unchanged at its last meeting in December. Actual production has fluctuated from 30.6 million to 32.4 million barrels a day since that target was introduced in December 2011, data compiled by Bloomberg show. The group pumped 31.03 million this month, the most in six months, with Saudi Arabia producing 9.35 million, according to the data.

Brent crude prices have slumped this year as Europe struggled to move beyond its debt crisis and Chinese growth and manufacturing showed signs of a slowdown. The decline brings prices in line with a level favored by Saudi Arabian Oil Minister Ali Al-Naimi.

“I said in March $100 is a reasonable price,” al-Naimi said earlier today. “Where are the prices today? They are still at the reasonable level.”

Excessive Production

While the group doesn’t have a formal price target, most member states also expressed their support for $100 oil. Some, including Venezuela, voiced concern over excessive production by other members, with OPEC pumping about 1 million barrels a day more than its target.

Iran has complained that other exporters around the Persian Gulf have benefited at its expense from U.S. and European Union sanctions driving its customers away.

The rising supply of U.S. shale oil poses a threat to some OPEC exporters and represents a “barrel-for-barrel” displacement of OPEC crude on the global market, even though the U.S. doesn’t yet export much, according to Roy Mason, founder of tanker tracker Oil Movements, in Halifax, England.

“This is not the first time the world sees supplies from new sources,” al-Naimi told reporters. “New supplies came in the past from areas such as North Sea, Brazil, Russia, and Mexico. What did happen after that? You can see by yourself today.”

Shale Oil

U.S. shale is a light crude and doesn’t affect exporters of medium and heavy grades such as Venezuela, the Latin American nation’s oil minister, Ramirez, told reporters yesterday.

Imports of comparatively light Angolan crude to the U.S. declined to 85,000 barrels a day in March, the lowest level since 1993, data from the U.S. Energy Department’s Energy Information Administration showed yesterday. U.S. imports from Nigeria rebounded to 376,000 barrels a day in March, after dropping to 194,000 barrels in February.

“They’re all impacted,” Kamel al-Harami, an independent oil analyst based in Kuwait, said by phone from London on May 29. “At what stage will they tackle the issue of shale oil and its impact on OPEC next year and the year after? This is not on the agenda yet.”

The 12 members of OPEC are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

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