Singapore: The Organization of the Petroleum Exporting Countries (Opec) is considering raising oil supply targets for the first time since 2007 in a move that could weaken $100 oil prices and lessen the drag of high energy costs on global economic growth.
Opec, which pumps more than one-third of the world’s oil, may raise supply targets by as much as 1.5 million barrels per day (mbpd) when ministers meet on 8 June, a delegate told Reuters on Thursday.
“There is a need for an increase to replace the loss from Libya,” the delegate said. “Oil prices are too high. $100 oil is scaring people.”
The most likely outcome would be for an increase of 1 mbpd. “That would be calming for prices,” the delegate said.
A rise of 1 mbpd in Opec’s output target would result in only a small increase in actual oil supply from the group, the delegate said. That was because part of the rise would simply absorb above-target supply that some members were already pumping, the delegate added.
The 11 members of the group bound by Opec production targets—all except Iraq—pumped 26.23 mbpd in May, nearly 1.4 mbpd above their 24.84 mbpd target.
“If this is 1 mbpd on top of the targets from over two years ago, then it’s meaningless. If it’s 1 mbpd above current production levels, then it’s exactly what the market needs,” said David Wech, analyst at JBC Energy in Vienna.
Raising formal output targets would force Opec to confront tough issues. Saudi Arabia holds most of the group’s spare capacity.
But other members would also want a share of any increase in supply targets, even if they were already at full capacity.
Opec members Iran, Libya and Venezuela could resist any rise in targets, industry publication Energy Intelligence reported on Wednesday, citing an Opec insider.
Iranian Opec governor Mohammad Ali Khatibi declined to comment on whether the group would agree a production increase.
“We will discuss it in the next meeting,” Khatibi said at a meeting of the gas exporters group in Cairo. “We should see all fundamentals...all indicators,” he added.
Algeria’s energy minister said on Thursday he did not expect Opec to raise output at its meeting in Vienna. “I do not think so,” energy and mines minister Youcef Yousfi said when asked if he expected an Opec output hike next week.
Libya, whose top oil official recently defected, would not want other Opec members to divide officially its share of the targets, the delegate said. Civil war has cut its exports.
Another delegate saw no need for a formal change and said Opec members could simply flout official targets to meet demand.
“Why bother?” he said. “Everybody is pumping what they want anyway and getting the money they want and more.”
Oil prices were steady on Thursday with Brent crude up 38 cents to trade at $114.91 a barrel at 1137 GMT.
Edmund Blair in Cairo contributed to this story.