Will OPEC increase, or leave oil output unchanged next week?
As next week’s OPEC meeting draws closer, analysts are divided as to whether the oil cartel will keep oil output unchanged, or to raise production targets.
An economic advisory group within OPEC on Friday presented findings showing global oil demand would increase significantly in the second half of 2011, according to a senior OPEC delegate from a Persian Gulf country.
OPEC Oil Output Increase?
“The most likely outcome of the meeting will be an increase. The amount of the increase is yet to be decided by OPEC ministers, all the numbers in the market now are just guesswork.” according the OPEC delegate.
The numbers presented at the meeting suggested OPEC will need to boost its oil production quotas beyond current output levels. The eleven member nations bound by quotas, Iraq is exempt, are already producing about 1.5 million barrels a day above allotments totaling 24.845 million barrels a day.
Current Oil Output Levels
OPEC has left its production target at 24.845 million barrels per day since early 2009. The IEA estimates that output stood at 26.15 million barrels per day in April.
However, Iran’s OPEC governor, Muhammad Ali Khatibi, said a move to boost output was difficult to understand in light of high inventories and the recent drop in oil prices.
“We should respond based on facts and figures, not based on rumors or expectations from OPEC.” Mr. Khatibi said in a telephone interview.
Oil Output Unchanged?
“I would expect OPEC to leave quotas unchanged, rather than raise them, given the growing evidence that global demand is slowing. We expect no change in OPEC quotas once again. Certainly, oil consuming nations would welcome an increase but increasingly, OPEC is responding to market signals outside of the formal quota system.” said Capital Economics analyst Julian Jessop.
The oil output debate suggests that next week’s gathering in Vienna could be OPEC’s most contentious in years, as the organisation struggles to find a common voice in response to $100 plus oil prices and the rising demand of consumers for more oil.
Next week’s meeting comes against a backdrop of historic political change in the oil rich Middle East and North Africa region that has exacerbated tensions between some Middle Eastern governments, as several have boosted domestic spending to head off further unrest.
OPEC has not boosted oil output since before the 2008 economic recession, the last output increase was way back in 2007.
