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OPEC set for no output change as oil price rises

business Updated: Oct 14, 2010 15:34 IST

OPEC stood poised to keep supply policy intact at a meeting in Vienna on Thursday and ministers said they were not worried yet a weak dollar would drive up the oil price too quickly for a fragile economy to bear.

Already on Wednesday OPEC's president Ecuador had said there was a consensus among members of the Organization of the Petroleum Exporting Countries to leave output unchanged.

Other ministers reiterated that view as they headed into Thursday's meeting, with Kuwait stating no change was the only likely outcome.

Top exporter Saudi Arabia, which has spoken in favour of a $70-$80 price range as ideal for producers and consumers, said the kingdom was still happy with the current oil market, although circumstances could change.

"The biggest challenge we have is to keep the oil market as it is today," Saudi Arabian Oil Minister Ali al-Naimi told reporters.

He declined to be drawn on a price level that might endanger economic recovery, but said producers were concerned about a possible slide back into recession.

"I hope we don't have a double dip. Everybody is working very hard to avoid it."

Oil rises, Dollar falls

International benchmark US crude has stayed in a broad $70-$80 range for much of this year, but rallied this month to a five-month high above $84 a barrel, pushed upwards by a weak US dollar.

The dollar on Thursday dropped to its lowest this year against a basket of currencies as markets anticipated further economic stimulus from the United States, the world's biggest economy and biggest oil burner.

A weaker dollar makes dollar-denominated commodities relatively cheap and has been fuelling buying across the asset class.

So far oil's gains have been relatively modest -- compared with gold which has hit a series of record highs -- as the dollar impact on oil has been countered by weak market fundamentals of nearly record-high fuel inventories and sluggish demand.

Price moderates, such as Saudi Arabia, which is keen to preserve long-term demand for its extensive reserves, would be uneasy if any rally were too rapid.

But those, including Venezuela, Algeria, Iran and Libya, which traditionally have sought a higher price have argued a weaker dollar erodes the value of their petrodollars and justifies more costly oil.

Algerian Energy and Mines Minister Youcef Yousfi said on Thursday he would like to see an oil price of between $80 and $100 per barrel, while Venezuela's Rafael Ramirez said he favoured $90-$100 for next year.

Any decision to keep output unchanged would still leave the group plenty of leeway to adjust supplies informally.

Compliance with the record cut of 4.2 million barrels per day (bpd) announced in December 2008 -- when OPEC last formally changed its output policy -- has slipped to 57 percent, according to the latest Reuters assessment.

Ministers could have the chance to discuss the situation again in the near future.

OPEC President Wilson Pastor of Ecuador has said he had invited ministers to attend another meeting in December in Quito.

As part of a wave of celebrations to mark the 50th anniversary of OPEC, which was founded in September 1960, Saudi Arabia is also hosting a meeting in Riyadh next week.