OPEC to debate token oil output rise
OPEC meets to consider a token rise in oil output proposed Gulf Arab states to placate consumer nations worried by the economic impact of $77 oil and rapidly diminishing stocks.business Updated: Sep 11, 2007 13:24 IST
OPEC meets on Tuesday to consider a token rise in oil output proposed by Saudi Arabia and other Gulf Arab states to placate consumer nations worried by the economic impact of $77 oil and rapidly diminishing stocks.
The plan may struggle to win support from members including Iran and Venezuela that take a more hawkish view of price.
"They favour a small increase," an OPEC source said of Saudi Arabia, the United Arab Emirates, Qatar and Kuwait. "But if they meet stiff resistance, they may just drop the idea."
The ministers themselves declined comment.
OPEC, pumping some 30 million barrels per day into the 86 million bpd global market, is trying to make sense of conflicting economic data leading into peak winter demand.
Industrialised consumer nations are forecasting their crude oil stocks will fall to the bottom of the five-year average range by January unless OPEC pumps more crude oil, and fast.
US crude oil is above $77, close to its August 1 record high of $78.77 a barrel.
But uncertainty over the US economy -- last month employers cut jobs for the first time in four years -- has cast doubt over oil demand growth in the world's top consumer.
The views of the Gulf Aarab states, particularly the world's biggest exporter Saudi Arabia, are key to OPEC policy decisions. They straddle more than half of OPEC's proven oil reserves and have almost all the organization's spare production capacity.
An increase of around 500,000 barrels per day (bpd) would placate consumer nations without flooding the market and causing a price collapse and would unwind some of the 1.7 million bpd of cuts agreed since Oct 2006 without making a ripple.
The 10 OPEC states subject to restraint are already pumping nearly 1.0 million bpd above their 25.8 million bpd limit.
"The impact of any decision seems marginalized by physical production already above official output limits," Citigroup analysts noted.
The latest position adopted by the Gulf Arab states marked a shift for most. The ministers of Kuwait, Qatar and the United Arab Emirates had all said on arrival in Vienna that crude supplies were ample. Some were concerned credit turmoil stemming from US subprime loans might hit the real economy.
Demand forecasts for the final quarter of the year point to an increase of up to 2.0 million bpd. At the top end, the International Energy Agency sees consumption rising to 88.1 million bpd. OPEC puts the figure at 87.08 million bpd.
US Secretary of Energy Sam Bodman said in Florida on Monday he had encouraged OPEC to increase supplies.
"They heard. They were courteous," he said.
The IEA's executive director, Nobuo Tanaka, said he too believed extra oil would be needed in coming months. "We think that the current market is very tight," Tanaka said.