VIENNA, Austria — Saudi Arabia’s oil minister said Tuesday he expected OPEC to keep output steady for the rest of this year, in comments reflecting expectations that crude prices and supply are in sync with the fitfully recovering world economy.
Along with other OPEC oil ministers, Saudi Arabia’s Ali Naimi had already indicated that the Organization of the Petroleum Exporting Countries would agree to keep production targets at present levels when the 12-country group meets Wednesday.
But his subsequent comments indicated that the Saudis — the informal policy setters for OPEC — expected the status quo to prevail for all of 2010; prices between $70 and $85 dollars a barrel and daily output at close to 27 million barrels.
Naimi told reporters he foresees “no change in OPEC output for the rest of the year.” On Monday he described the market as being “in a very happy situation.”
The Saudis, who are OPEC’s top producers, usually have their way within the organization. But with U.S. demand for oil lacklustre, even traditional price hawks like Iran and Venezuela are happy with present prices near $80 a barrel as the 12-nation organization prepares to make a decision on output Wednesday.
“Anything else than a roll-over of the current target production would be a big surprise,” said Vienna’s JBC Energy, in comments looking ahead to Wednesday.
OPEC has left its members’ production quotas unchanged since December 2008, when it announced the last of a series of cuts aimed at bringing their output down by 4.2 million barrels per day. The cuts helped engineer a rebound in crude prices, which had collapsed to the low $30s from a mid-2008 high of almost $150 per barrel.
Since the oil ministers last met three months ago, prices mostly have hovered between $70 and $80 a barrel — a range that most OPEC nations have factored into their national budgets this year. That has kept even hard-liners Iran and Venezuela on board with other OPEC members.
“OPEC should not take any decision to change production,” Iranian oil minister Masoud Mirkazemi told reporters in Tehran on Monday, echoing comments voiced by Rafael Ramirez, his Venezuelan counterpart, and other ministers.
“We’re happy with the situation,” said Nigerian oil minister Rilwanu Lukman. Iraqi Oil Minister Hussain al-Shahristani said he thought “we should keep things as they are.” And Jose Botelho de Vasconcelos, Angola’s oil minister described present prices as “fair,” adding that an add-on of just $10 could jeopardize the world’s economic recovery.
Still, there will be behind-the-scenes pressure on some members to produce less by honouring their allotted targets.
OPEC now is producing nearly 2 million barrels above its official target — a result of cheating by individual nations on their quotas. While OPEC does not reveal which nations are overproducing and by how much, overall quota compliance within the group is now estimated at little more than 50 per cent.
All OPEC countries except Iraq are under quotas.
The ministers of Qatar and Kuwait said the Vienna meeting would urge members to keep to their quotas. Naimi’s comments left open the possibility that OPEC might raise quotas at a later date, to bring formal output closer to real production.
Oil prices climbed on the eve of the meeting, with benchmark crude fetching $81.88 a barrel on the New York Mercantile Exchange after a weak U.S. housing report showing construction of new homes and apartments falling 5.9 per cent in February. The weak showing put downward pressure on the dollar, sending investors into the crude market.
World oil demand is expected to rise this year due to surging economic activity in Asian countries, especially China. The International Energy Agency, which advises oil-consuming countries, predicts that the world’s appetite for crude will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than 2009’s 86.5 million barrels.
Still, oil markets remain concerned about shaky demand in the U.S. Crude consumption there and in other top industrialized nations is expected to contract in 2010 for the fifth consecutive year.
Alluding to the uncertain world economic situation, Algerian Energy Minister Chakib Khelil said he expected crude to fluctuate “in the $75 to $85 range” for the rest of the year.