OPEC to sit tight over oil output on supply strains
VIENNA, Austria – OPEC is set to stick to its oil output limit at a meeting here on Wednesday, even as Iraq and Iran eye higher crude exports amid slashed Libyan production.
The Organization of Petroleum Exporting Countries does not see a need to alter the cartel’s crude production ceiling of 30 million barrels per day (bpd), member nations led by the world’s biggest oil producer Saudi Arabia have said in Vienna ahead of the meeting.
Oil market analysts are meanwhile not expecting any surprises on output Wednesday at the headquarters of OPEC, whose dozen member nations from the Middle East, Africa and Latin America together produce about one-third of the world’s crude.
“It is unlikely that OPEC will adjust its official notional production ceiling as it is unlikely that either Iran and Iraq can contribute incrementally in any significant manner to the cartel’s supply next year,” Harry Tchilinguirian, BNP Paribas’ global head of commodity markets strategy, told AFP.
OPEC, which is currently pumping slightly below its ceiling, is facing also demand strains as consumers increasingly turn to cheaper oil and gas extracted from shale rock, particularly in North America.
At the same time, cartel members Iraq and Iran are seeking to hike their production after sizeable cuts to output in recent years.
Iran’s Oil Minister Bijan Zanganeh on Tuesday said that the country would be able to “immediately” export more crude oil once sanctions are lifted in the wake of the international deal to roll back its nuclear program.
“We have no technical difficulties to expand our exports and to return to four millions barrels a day oil output,” he said, noting however the presence of “political” obstacles.
Iranian crude oil exports have been slashed to about 1.2 million bpd from 2.5 million bpd in 2011, according to Zanganeh.
At the same time, Iraq’s Oil Minister Abdelkarim al-Luaybi said in the Austrian capital that his country hoped to export 3.4 million bpd of crude oil next year, including 400,000 bpd from Iraqi Kurdistan, as it looks to recover from years of bloodshed.
This compares with exports of 2.38 million bpd in November.
The market though doubts how quickly new production can come on board.
“OPEC will find it very hard to come to an agreement to cut production given a significant number of its members – Iran, Iraq, Libya, Nigeria – are suffering from constrained production,” said Thomas Pugh, commodities analyst at Capital Economics consultants.
Libya’s output has plunged to around 250,000 bpd compared with its usual production of 1.5 million amid deadly fighting between radical Islamist fighters and the army.
Nigeria meanwhile faces regular acts of sabotage to its oil pipelines.
OPEC kingpin Saudi Arabia has said it is satisfied with current crude prices as well as global supply and demand levels.
“The market is in the best position it can be,” Saudi Oil Minister Ali al-Naimi said this week.
Saudi Arabia argues that current prices averaging $100 per barrel provide acceptable income for producers without weighing too heavily on consumers.
Pumping about 35 percent of the world’s crude, OPEC will Wednesday decide also on whether to replace Abdullah El-Badri as secretary general.
Saudi Arabia is battling against Iraq and Iran for the position of succeeding Badri, who has steered the cartel through the financial crisis in the role of administrative head since 2007.
OPEC voted in December last year to re-appoint the Libyan for another year after members failed to agree on a new secretary general.
