OPEC cartel mulls output hike amid Libya divisions

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© AFP/File Joseph Capellan

 

OPEC has left its production target at 24.84 million barrels per day (mbpd) since early 2009
© AFP/File Jeff Pachoud

VIENNA (AFP) – The OPEC oil cartel mulled a possible output boost Tuesday on the eve of a crucial production meeting against a background of deep divisions over Libya and consumer calls for lower prices.

The Organization of the Petroleum Exporting Countries (OPEC), whose dozen member countries together pump 40 percent of the world’s oil, meets on Wednesday for an output decision which is hotly awaited on global financial markets.

Oil prices have skidded lower this week on worries about a faltering worldwide economic recovery and speculation that OPEC may raise supplies to compensate for dwindling output from Libya.

“We need to really look beyond the second quarter (when the market) will be a little bit tight,” UAE Energy Minister Mohamed bin Dhaen al-Hamli told reporters on arriving in Vienna.

OPEC has left its production target at 24.84 million barrels per day (mbpd) since early 2009 but the cartel is pumping above that limit.

The International Energy Agency estimates that output stood at 26.15 mbpd in April as the cartel sought to compensate for lost Libyan supplies.

Saudi oil officials, backed by Gulf producers such as Kuwait and the UAE, are pressing for an increase of up to 1.5 million barrels a day, despite resistance from Iran and Iraq.

Such a rise would simply legitimise the cartel’s current excess output and would unlikely see OPEC change its official production ceiling, according to analysts.

Delegations were meanwhile gathering in the Austrian capital on Tuesday amid fears that high prices could further dent energy demand. Despite falling on Tuesday, Brent oil remains above $100 a barrel and at levels that are widely viewed as a threat to economic recovery.

A boost to output would likely ease prices and thus reduce producer revenues — a scenario which OPEC president Iran fervently opposes.

“There is no need to increase production of OPEC countries,” the Islamic republic’s OPEC representative Mohammad Ali Khatibi was quoted as saying by Iranian television.

“The market is balanced … the downward trend in oil prices means that producers must be very cautious before any increase in output,” he said on behalf of Iran, which is holding the rotating OPEC presidency for the first time since the 1979 Islamic revolution.

Iraq agreed that there was no need for increased output.

“I don’t see any need for OPEC to raise production at Wednesday’s meeting,” said Iraqi Oil Minister Abdulkarim al-Luaybi, cited by Dow Jones Newswires. “Up to now, data on stocks and supply are good.”

Tehran’s caretaker oil minister Mohammad Aliabadi was keen to stress that no consensus had yet been reached.

“Of course, we’ll get the viewpoints of all members of the OPEC,” Aliabadi told reporters in Vienna on Tuesday.

“At the end of the meeting, I will inform you whatever the decision will be. I will talk after the meeting.”

In the run-up to the meeting, most analysts said they expected the cartel to leave production quotas unchanged, despite the recent rise in oil prices spurred by unrest in the Arab world.

 

"We need to really look beyond the second quarter (when the market) will be a little bit tight," Hamli said
© AFP/File Joseph Capellan

However, a batch of gloomy economic data has sparked genuine concern that high prices could further dent the global recovery.

At the same time, this week’s oil meeting could be overshadowed by deep divisions within OPEC over fellow member Libya.

Qatar has recognised Libya’s opposition National Transitional Council, pledging to help the rebels export oil while the UAE took part in NATO operations against Libyan leader Colonel Moamer Kadhafi. Kuwait has meanwhile promised large financial support for the rebels.

Libya was producing 1.4 million barrels a day before the unrest but this has since almost ground to a halt. Last month, Shukri Ghanem, head of the state-run National Oil Corporation (NOC) who represented Libya at OPEC, resigned and joined rebels seeking to overthrow Kadhafi.

Kadhafi will be represented at this week’s OPEC meeting by Omran Abukraa, ex-head of the national electricity authority, a person close to the matter told AFP on Tuesday.

Kadhafi’s forces have been fighting rebels since mid-February and in March the UN Security Council gave the go-ahead for international military action against his regime.