OPEC Could Raise Production Limits in September
Outgoing OPEC Secretary-General Ali Rodriguez said the oil cartel was likely to raise production in time for the fourth quarter as global fuel demand picks up. Rodriguez, as well as OPEC ministers, have already said the group will hold supply curbs in place when the group meets on June 26 in Vienna.
The cartel is not scheduled to meet until September to decide supply policy for the fourth quarter, when the northern hemisphere winter lifts fuel demand.
OPEC cut supply by 1.5 million barrels per day (bpd) from the start of this year, triggering a rally that has added more than 25 percent to oil prices. Fear that violence in the Middle East could disrupt the region's oil supplies fueled the gains. Analysts have warned that leaving a supply increase until the September meeting could be mean a sharp rise in oil prices later in the year. "It is probable we would increase production before September because demand will increase in the fourth quarter," Rodriguez told reporters in New York before a meeting of the Council of the Americas. Rodriguez said it was also possible that the cartel, which controls two-thirds of world oil exports, could wait until its scheduled September 18 ministerial conference to raise production.
Oil prices have fallen in recent weeks to the lower end of OPEC's $22-28 a barrel target range for its basket of cartel crudes. Fuel demand should pick as global economic recovery strengthens, while U.S. gasoline consumption, which swallows over 10 percent of all world oil, is already running above last year's levels. The U.S. government's Energy Information Administration has warned that oil prices could hit $30 later this year unless OPEC lifts production by up to 1 million bpd. "It still looks to us that in the third quarter you're going to start seeing inventories fall with demand picking up," said EIA analyst Doug MacIntyre.
Five non-OPEC producers agreed to cut nearly 500,000 bpd on top of OPEC's reductions, but two of the main contributors, Russia and Norway have said they see no reason to extend curbs beyond the end of June. Rodriguez said that oil officials from OPEC countries will meet with the five non-OPEC nations -- as well as emerging producer Kazakhstan -- on June 21. Non-OPEC Mexico has indicated that it is leaning toward continuing the curbs, tiny Oman will also maintain its small cut, while Angola has not spelled out its position.