Prospects for Europe’s economy are “not so positive” and will determine short-term market fundamentals, al-Naimi said today. He said on June 11 that there may be a need for a higher output ceiling.
While history shows that OPEC has always cut production in the past 10 years when faced with a price decline of more than 10 percent in the three months prior to a conference, the consensus among analysts is that prices are still too high to persuade all members to opt for such action this week. All 20 traders and analysts surveyed by Bloomberg News last week said they expect the group to keep its official daily production ceiling at 30 million barrels a day.
OPEC is collectively pumping 1.58 million barrels a day more than its target, according to a monthly report from its secretariat that uses secondary sources such as analysts and news agencies for output estimates.
“There is a big surplus in supply, and there is a big decline in prices, and this does not serve either the producers or the consumers,” Abdul Kareem al-Luaibi, Iraq’s oil minister said Vienna yesterday. “If the 30 million barrel-a-day production was respected, prices would have been stable,” said al-Luaibi, who also holds OPEC’s rotating presidency.
Saudi Arabia boosted output to 9.92 million barrels a day in May from 9.88 million barrels a day the previous month, according to OPEC estimates. The kingdom said it had cut production to 9.8 million from 10.1 million barrels in April.
Al-Luaibi said he supported “price stability” amid production outages in Syria and Yemen and tightening sanctions on Iran. An EU ban on buying Iranian oil takes effect on July 1.
“Given the extreme positions, maintaining the status quo is the most probable solution” for the ceiling, Chakib Khelil, a former Algerian oil minister who held the OPEC presidency in 2008, said in an interview in Vienna. “Oil demand is struggling, they never expected the European crisis to get so deep, you don’t know which country will be next to suffer.”
Mohammad Ali Khatibi, Iran’s OPEC governor, criticized members of the oil producer-group, including Saudi Arabia, for boosting production and seeking to replace Iranian crude on the global market, Press TV reported on June 9.
Saudi Arabia, Kuwait and the U.A.E. are “the biggest violators” of the OPEC output quota, the state-run news agency said, citing Khatibi. “It isn’t right that two or three nations compensate for a country that is targeted by sanctions,” Press TV reported Khatibi as saying. OPEC members shouldn’t work against each other, the news agency quoted him as saying.
OPEC said the outlook for oil consumption was clouded by Europe’s debt crisis and slowing growth in emerging nations.
“Ongoing challenges to world economic recovery have led to even larger uncertainties for oil demand in the second half of this year,” the group said in its monthly report yesterday. “High OPEC crude oil production standing above market requirements provides further confirmation that the market remains amply supplied.”