June 13 (Bloomberg) -- Divisions within OPEC signal the group will probably keep its crude production ceiling unchanged tomorrow as falling prices limit Saudi Arabia’s ability to justify a higher quota.
Iran, facing a European Union embargo on its oil exports, and Venezuela have been joined by Iraq, Angola, Libya and Ecuador in saying that global crude supplies are already excessive. The group’s biggest producer, Saudi Arabia, is pumping near its highest level in three decades and said June 11 that there may be a need to boost the target.
Leaving the production quota unchanged may be the likeliest compromise because it allows smaller producers to protect revenue after Brent crude’s 23 percent decline since March, while preventing a price rally that would curb economic growth. The 12 members of the Organization of Petroleum Exporting Countries are meeting in Vienna a year on from a gathering that ended without consensus, prompting Saudi Oil Minister Ali al- Naimi to say that it was “the worst” he had ever attended.
“Oil demand remains high, but so do fears of the economy and that is going to weigh on members’ ability to make a decision on the quota,” Jason Schenker, the president of Prestige Economics LLC, a commodity researcher in Austin, Texas, said in an interview in Vienna yesterday. Brent will average $120 a barrel next year on forecasts of global growth, he said.
Brent crude, a benchmark contract for more than half the world’s oil, rose as high as $128.40 on the London-based ICE Futures Europe exchange on March 1. The contract dropped 0.9 percent yesterday to $97.14, the lowest settlement since Jan. 25, 2011, and traded as low as $96.67 today.
OPEC should raise its output ceiling by 500,000 to 1 million barrels a day to keep prices at current levels amid Europe’s debt crisis, two delegates from Middle Eastern member countries said.
Opposition from other nations, such as Iran and Venezuela, will probably result in the group’s collective output limit remaining unchanged, according to the delegates, who declined to be identified because a final decision will be made tomorrow.
The June 2011 gathering broke down because the Saudis and three other Gulf Cooperation Council nations were ready to supply more oil, while six members opposed an increase in production quotas.