Libya Says 50% Chance OPEC Will Cut Output at Vienna Meeting By Flavia Rotondi and Adam L. Freeman
May 24 (Bloomberg) -- There is a “50 percent chance” OPEC will cut production quotas this week as the group seeks to reduce excess supply, a move that could help crude prices rise to more than $70 a barrel, Libya’s top oil official said.
“There is a fifty-fifty chance” for a production change at the OPEC meeting in Vienna on May 28, Shokri Ghanem, chairman of Libya’s National Oil Corp., said in an interview in Rome today.
Ghanem’s comment follows Saudi Arabian Oil Minister Ali al- Naimi saying yesterday that OPEC members will probably “stay the course” when they meet. His Algerian counterpart Chakib Khelil said in an interview today a production cut is not likely as he sought more discipline in complying with output targets.
The 12 members of the Organization of Petroleum Exporting Countries will update their policy on oil output at the meeting on May 28. At the last summit on March 15, the group decided to leave quotas unchanged and adhere to its earlier commitment to restrict supply by a total of 4.2 million barrels a day from levels in September 2008.
Oil has climbed 86 percent from a four-year low at the end of last year, reaching a six-month high of $62.26 on May 20 as OPEC implements record supply reductions to adjust to lower demand and rising stockpiles. The group will maintain a production target of 24.845 million barrels a day when it meets May 28, according to a Bloomberg survey.
Implementing the cuts and taking excess oil of the market may help prices stabilize, Ghanem said. “This will bring us back to normalcy and normalcy means it won’t go back to the high price we saw last year,” he said. “A price in the $70s will be achieved.”
Quota Compliance
Al-Naimi told reporters in Rome today that he’s “happy with compliance” of member states to output quotas. Adherence with as much as 80 percent of the agreed-to reductions is “the best we can expect.”
The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day in April, down from a revised 82 percent in March, the Vienna-based OPEC said May 13. The group cut its 2009 forecast and now estimates daily oil demand will fall by 1.57 million barrels, or 1.8 percent, to 84.03 million barrels a day this year.
More discipline by OPEC nations would allow production to be cut by about 800,000 barrels a day and reduce crude inventories held by the most industrialized nations to 52 to 53 days, from more than the current 60 days, Khelil said.
Crude inventories in the industrial economies of the Organization for Economic Cooperation and Development are at their highest since 1993, at 62 days of consumption, according to the International Energy Agency.
The three OPEC ministers were in Rome to attend a meeting of energy ministers of the Group of Eight nations.
To contact the reporter on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net; Flavia Rotondi in Rome at frotondi@bloomberg.net.
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