OPEC+headquarters+ViennaOPEC will keep its crude production limit unchanged next week as it anticipates demand in line with its current target, and as members struggle to agree on their individual share of the total.

The Organization of Petroleum Exporting Countries will reaffirm their collective limit of 30 million barrels a day, first set two years ago, when its 12 members gather in Vienna on Dec. 4, 22 of 24 analysts and traders polled this week according to a Bloomberg survey. The group expects demand for its crude to average 29.6 million barrels a day in 2014. Saudi Arabia, the biggest member, will probably make any supply cuts it deems necessary on an informal basis, Societe Generale SA said.

“If it ain’t broke, don’t fix it,” said Mike Wittner, Societe Generale’s head of oil research at SA in New York. “They don’t have to do anything at the meeting. They’re under no pressure, and prices are where the Saudis and others like. The Saudis will do what it takes to balance the physical crude market.”

Economic growth in emerging economies led by China will stem the slide in demand for OPEC’s crude, which is being eroded by the boom in shale oil output in North America. Agreeing on a new supply target to reflect lower consumption would conflict with Iraqi plans to expand production capacity and Iran’s efforts to restore exports blocked by sanctions, according to the Centre for Global Energy Studies.

Spending Needs

Brent crude prices are currently near $110 a barrel, double the level averaged from 2000 to 2009 and little changed from last year’s mean. Prices are $20 to $25 a barrel higher than the minimum needed by Saudi Arabia, OPEC’s biggest member and de facto leader, to cover its spending requirements, estimates CGES, a consulting company in London founded by former Saudi oil minister Ahmed Zaki Yamani.

OPEC’s crude production averaged 30.6 million barrels a day last month, with Saudi Arabia pumping about 33 percent of the total, according to a monthly Bloomberg survey.

Iraqi Oil Minister Abdul Kareem al-Luaibi and Angola’s Jose Maria De Vasconcelos de Vasconcelos said on Nov. 10 in Abu Dhabi they don’t see any need for the organization to modify its target. Saudi Arabian Oil Minister Ali al-Naimi has yet to publicly express a view.

“The problems of getting any deal done are compounded by the lack of individual quotas,” said Leo Drollas, CGES’s chief economist. OPEC hasn’t published individual production allocations since the last time it formally announced an output cut, in December, 2008. Iran and Iraq would resist any commitment to lower targets because their output has already been curbed by sanctions and conflict, Drollas said.

Iran Return

An agreement between Iran and western powers on its nuclear program on Nov. 24 may pave the way next year for the return of some of its oil exports, which have been cut in half by sanctions, said Andy Sommer, an analyst at Axpo Trading AG in Dietikon, Switzerland.

Iraq aims to bolster oil production by about 500,000 to 750,000 barrels a day next year as part of its plan to almost triple output to 9 million a day by the end of the decade, Deputy Prime Minister Hussain Al-Shahristani said in Daegu, South Korea, on Oct. 16.

The two respondents, out of the 24 in Bloomberg’s survey, who didn’t predict that OPEC would retain its current ceiling said the organization would announce a cut instead.

Nineteen of 20 analysts polled by Bloomberg news in the week prior to OPEC’s last meeting, on May 31, correctly forecast that the organization would keep the group target unchanged.

OPEC may also discuss the appointment of a successor for Secretary-General Abdalla El-Badri, whose extended term expires at the end of this year. El-Badri, originally appointed in 2007, was asked to remain in the role through 2013 after OPEC ministers failed to select a replacement last December among candidates from Ecuador, Iran, Iraq, Saudi Arabia.

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


[Business Day]