Vienna: With US demand for oil lackluster, even traditional price hawks such as Iran and Venezuela are happy with present prices near $80 a barrel as they head into Tuesday’s meeting of the 12-nation Organization of Petroleum Exporting Countries, or Opec.
These two countries traditionally are the greatest advocates of tight Opec supply. But ahead of their meeting there is informal unanimity among Opec oil ministers that—with the world’s economic recovery feeble at best and crude prices at preferred levels—it’s best not to rock the boat.
That means the ministers will likely agree to maintain Opec’s formal production target, now at 26 million barrels per day (mbpd)—a benchmark set over one year ago.
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 mbpd. 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 hardliners 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 Venezuean counterpart.
Still, there will be behind-the-scenes pressure on some members to produce less by honouring their allotted targets. At close to 27 mbpd, Opec now is producing a daily 600,000 barrels above its official target—a result of cheating by individual nations on their quotas. While Opec does not reveal which nations are overproducing, the Paris-based International Energy Agency, or IEA, put overall quota compliance within Opec at only 58% in January.
World oil demand is expected to rise this year due to surging economic activity in Asian countries, especially China. IEA, which advises oil-consuming countries, predicts that the world’s appetite for crude will average 86.6 mbpd this year.
Still, oil markets remain concerned about shaky demand in the US. Crude consumption there and in other top industrialized nations is expected to contract in 2010 for the fifth consecutive year.