OPEC to Keep Oil-Production Ceiling Unchanged

OPEC Thursday agreed to maintain its existing oil-production agreement, said OPEC delegates, but several members signaled that the group could meet again soon if prices retreat much more.

The Organization of Petroleum Exporting Countries kept its combined production ceiling for its 12 members at 30 million barrels a day, a status quo result that had been telegraphed earlier this week following a bilateral meeting between ministers from Saudi Arabia and Iran, who lead rival factions within OPEC.

The decision comes as global oil inventories are brimming after several months of heavy output from Gulf OPEC members, especially Saudi Arabia. Several OPEC members have called on Gulf producers to cut back.

OPEC ministers remained in a closed-door meeting early Thursday evening after members decided to keep the production ceiling unchanged, people familiar with the matter said.

"They have agreed to keep the ceiling at 30 million barrels a day," a non-Gulf delegate said.

Three delegates from different OPEC member nations said the group had reached a decision to keep the output ceiling unchanged, but the closed-door meeting continued at 1700 GMT.

One delegate said the group had also discussed candidates for a new OPEC secretary general. It was unclear, however, whether a deal would be reached on the choice of a candidate to replace Secretary General Abdalla Salem el-Badri, who has held the post since January, 2007. Mr. el-Badri is set to leave at the end of the year. Saudi Arabia and Iran have each proposed their own candidates for the post.

The Algerie Presse Service, Algeria's official news agency, also reported on its website Thursday evening that the organization had agreed to maintain its ceiling on production of 30 million barrels a day.

But several members, before the meeting, pointed Thursday to the possibility of an emergency meeting, should oil prices continue to slide. Oil prices have lost more than 20% of their value in recent weeks amid concerns about weak global economic growth.

Kuwait oil minister Hani Abdulaziz Hussain, who is considered one of the group's more consumer-friendly members, told reporters in a pre-meeting scrum that oil prices around $100 a barrel are "acceptable and reasonable" and that the group could meet again if oil prices slip below $90 a barrel.

Iranian oil minister Rostam Ghasemi said he was satisfied with oil prices between $100 and $120 a barrel. "If prices go down further, definitely we will have a meeting," he said.

As is often the case at OPEC meetings, Thursday's agreement to maintain current output comes against a backdrop of uncertainty in the oil market. This time, the key questions concern the effect of economic weakness on oil demand and the issue of just how much Iranian oil will leave the oil market due to international sanctions on the Islamic Republic.

In recent months, OPEC members have been pumping well above the production ceiling of 30 million barrels a day set at the group's last meeting in December. OPEC members in May pumped close to 31.6 million barrels a day, according to the OPEC monthly report this week, citing secondary sources. Those figures include Saudi output of around 9.9 million barrels a day, an extremely high level.

The lofty Saudi output follows lobbying of Saudi Arabia by the United States, the European Union and others to raise output in anticipation of sanctions on Iran.

Other OPEC members this week expressed criticism of Gulf countries for boosting output so aggressively in spite of the weakening economy.

Credit Suisse this week warned that oil prices could fall steeply if the euro-zone crisis instigates a severe credit crunch.

In the bank's "worst-case" scenario, which sees a repeat of the 2008 recession, the price of oil would tumble to $50 a barrel and would fail to recover much beyond $80 a barrel for the next few years, it said in a note released Wednesday.

Venezuelan oil minister Rafael Ramirez earlier this week vowed to press Gulf countries on their "overproduction."

"It will have to be reduced," Mr. Ramirez said Tuesday.

Because of this excess supply, "We are worried about the stabilization of the price. The price has lost $30 in two months. We believe that the price has to be over $100 a barrel," Mr. Ramirez said.

Copyright (c) 2012 Dow Jones & Company, Inc.


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