Divisions within OPEC signal the group will probably keep its crude production ceiling unchanged today as falling prices limit Saudi Arabia's ability to justify a higher quota. Iran, facing a European Union embargo on its oil exports, and Venezuela have been joined by Iraq and Angola in warning that global crude supplies are already excessive.
The group's biggest producer, Saudi Arabia, is pumping near its highest level in three decades and said on June 11 that there may be a need to boost the target. Leaving the production quota unchanged may be the likeliest compromise because it allows smaller producers to protect revenue after Brent crude's 24 percent decline since March, while preventing a price rally that would curb economic growth. Saudi Arabia The 12 members of the Organisation of Petroleum Exporting Countries (OPEC) are meeting in Vienna a year on from a gathering that ended without consensus, prompting Saudi oil minister Ali Al Naimi to say that it was 'the worst' he had ever attended. "Oil demand remains high, but so do fears of the economy and that is going to weigh on members' ability to make a decision on the quota," Jason Schenker, the president of Prestige Economics, a commodity researcher in Austin, Texas, said in an interview in Vienna on Monday. Brent will average $120 a barrel next year on forecasts of global growth, he said. Brent crude, a benchmark contract for more than half the world's oil, rose as high as $128.40 on the ICE Futures Europe exchange on March 1.
The contract dropped 0.9 percent on Monday to $97.14, the lowest settlement since January 25, 2011, and traded as much as 39 cents higher yesterday. Suggested gain Gulf producers recommend an increased ceiling to accommodate growing demand before the winter, said a delegate yesterday, who declined to be identified because OPEC members are still in talks before the formal session tomorrow. The June 2011 gathering broke down because the Saudis and three other Gulf Cooperation Council (GCC) nations were ready to supply more oil, while six members opposed an increase in production quotas.
While history shows that OPEC has always cut production in the past 10 years when faced with a price decline of more than 10 percent in the three months prior to a conference, the consensus among analysts is that prices are still too high to persuade all members to opt for such action this week. All 20 traders and analysts surveyed by Bloomberg News last week said they expect the group to keep its official daily production ceiling at 30 million barrels a day.
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