OPEC Keeps Lid on Oil Production Targets
By THE ASSOCIATED PRESS Published: June 8, 2011
VIENNA (AP) — OPEC decided on Wednesday to maintain its crude oil output levels and meet again within three months to discuss a possible production increase.
The decision was unexpected and reflected unusual tensions in an organization that usually works by consensus.
Saudi Arabia and other influential oil-producing nations had pushed to increase production ceilings to calm markets and ease concerns that crude was overpriced for consumer nations struggling with their economies.
Those opposed were led by Iran, the second-strongest producer within the Organization of the Petroleum Exporting Countries.
OPEC’s secretary general, Abdullah al-Badri, told reporters: “We are unable to reach consensus” to raise production.
The 11 OPEC members under production quotas are already exceeding them. Their output is an estimated 26.15 million barrels daily — about 1.3 million barrels above the daily overall OPEC production target of 24.85 million barrels a day agreed two years ago.
Iran and Venezuela came to the meeting opposing any move to increase output, which would have probably lowered prices for benchmark crude from the present levels of around $100 a barrel.
But OPEC powerhouse Saudi Arabia, which favors prices of around $80 a barrel, wanted higher production levels — and served notice that it was prepared to raise production unilaterally, to close to 10 million barrels a day from its present daily production of about 8.7 million barrels.
In advance of the meeting, Mohammed bin Dhaen al-Hamli, the oil minister for the United Arab Emirates, spoke of “tight” supplies. He added, “If there is a need for more oil, we will supply more oil.” Qatar’s energy minister, Mohammed Bin Saleh Al-Sada, was more unequivocal, saying outright that he backed an output level increase.
Ehsan Ul-Haq, an analyst with KBC Energy Economics, noted the clout the Saudis have within OPEC, saying that if they want more oil on the market, they “don’t need the Iranians, they don’t need the Venezuelans, they can do it alone.”
OPEC oil ministers faced a particularly complex mix of geopolitical and market tensions in their decision Wednesday.
Unrest in Libya and Yemen threatens to destabilize larger oil-producing nations in the region. Those two countries normally produce less than 4 percent of the world’s oil needs, and Saudi Arabia and others have raised output to make up for much of the shortfall. But worries that the violence could spread to bigger producers and seriously cut into world output has caused jitters, both from crude exporting nations and from the United States, China and other consumers with huge energy needs.
The shaky state of the global economy is also causing worries.
Weak housing and employment reports from the United States added to the gloom spread by Europe’s attempts to bail out governments and Japan’s nuclear disaster at the Fukushima power plant. At its present price of around $100 a barrel, benchmark crude may be too expensive for nations struggling to make ends meet, worsening the economic picture and leading to less oil demand.
But with sputtering economies using less energy, raising output to lower prices could also flood the market, leading to a surplus that could drive prices below $80 a barrel. Even that benchmark, which was preferred by the Saudis and other moderate OPEC members, is considered too low by Iran and Venezuela.
Tuesday’s sober assessment of the United States economy from the Federal Reserve chairman, Ben S. Bernanke, added to concerns, especially as the central banker failed to indicate that more monetary stimulus was likely.
OPEC’s president, Mohammad Aliabadi of Iran, spoke of a “nervous six months for the oil market.”
