By Mitra Amiri and Alex Lawler
The Organization of the Petroleum Exporting Countries, source of more than a third of the world’s oil, meets on Dec. 14 in Vienna, six months after its last gathering collapsed in acrimony and without a deal.
In June, Iran successfully opposed a move led by top exporter Saudi Arabia to raise OPEC quotas to meet a shortfall in supplies from Libya. Saudi Arabia and its Gulf OPEC allies raised production anyway after the meeting — a move criticised by price hawk Iran.
“We will ask the countries that increased their production when Libya stopped production to change the level of production to the previous level,” the Iranian oil ministry’s SHANA website quoted new oil minister Rostam Qasemi as saying.
A cut in supplies to May’s levels would entail removing some 500,000 barrels per day (bpd) from OPEC production, a move unlikely to find support among the Gulf Arab OPEC members while oil prices remain well above $100 a barrel.
“As of now I don’t see a need for Gulf countries to change their output because the market is still in need and Libya is not back to pre-war levels,” a Gulf OPEC delegate said, reacting to Iran’s call on Friday.
Bill Farren-Price, oil consultant at Petroleum Policy Intelligence, also thought the prospect of OPEC and Saudi Arabian output curbs unlikely.
“Oil prices are currently being buoyed as an asset class amid turmoil in the bond and equity markets. No responsible and serious player within OPEC would want to send oil prices higher than current levels by agreeing any sort of output cut given the downside risks to the economic outlook,” he said.
Iran’s call for supply cuts may also make agreement on a new OPEC production target more difficult. Failure to do so could be damaging for the group should it need to curb supplies in 2012 in the event of a serious weakening of the world economy.
OPEC in December 2008 set a target for 11 members, all excluding Iraq, to pump 24.84 million bpd. They are pumping over 2 million bpd more than this, and OPEC officials have said that target is no longer valid.
GRADUAL PROCESS OF CUTBACKS
Gulf OPEC delegates have said they will reduce output to make way for a recovery in Libyan supplies when it happens, although this will probably be a gradual process extending into 2012.
OPEC supply has fallen slightly in the last two months as reduced output from Iraq, Nigeria, Saudi Arabia and Angola offset a further rise in Libya, according to the latest Reuters survey published on Oct. 31.
But output remains higher than it was in May, when Libyan output had slowed to a trickle. Total OPEC production in October was 29.59 million bpd, 490,000 bpd higher than 29.1 million bpd in May, according to Reuters estimates.
Brent crude was steady just below $114 a barrel on Friday, after sharp gains in the previous session, and Qasemi said prices around or above $100 were “appropriate”.
“The current situation of oil is relatively fair but as a producer we prefer that the price is better than its current level,” he was quoted as saying by the official IRNA news agency.
OPEC’s Gulf Arab members are typically its most moderate on prices because they do not want high energy costs to restrict economic growth and long-term demand for their main source of export revenue.
One Gulf Arab official told Reuters in September a price of $90 was “high” and those producers were unlikely to reduce supplies to prop up oil prices unless crude fell below $90 for a sustained period. (Additional reporting by Amena Bakr; Editing by Richard Mably)
