OPEC; Oil Heads for Best Year Ever

Most members of the Organization of Petroleum Exporting Countries are signaling they’ll keep production policy unchanged at a meeting in Vienna today as the group struggles to agree on a new secretary-general.

While OPEC’s own forecasts show that it’s pumping more than consumers need, Saudi Arabia, Iraq, Iran, the United Arab Emirates, Angola, Ecuador and Libya have indicated that supply and demand are approximately in balance, suggesting that the group will stick to its official output target of 30 million barrels a day. Brent crude is heading for its highest-ever annual price, averaging $111.78 a barrel so far this year in London.

“They’re pretty happy with where oil prices are,” Bill Farren-Price, the chief executive officer of Petroleum Policy Intelligence, who correctly predicted the group’s last quota change in 2011, said in an interview with Bloomberg Television in Vienna yesterday. “They probably don’t want to play around with the formal target at the moment, and they’ll probably just continue with this policy of informal production adjustment.”

High prices are handing OPEC members more than $1 trillion in annual revenue for a second straight year and boosting income for companies from Royal Dutch Shell Plc to Chevron Corp. Brent futures, near $108 yesterday, have dropped 16 percent from this year’s peak on concern that Europe’s failure to resolve its debt turmoil is damaging the global economic recovery at a time when non-OPEC supply is growing, particularly in the U.S., which is undergoing an energy boom thanks to hydraulic fracturing of shale deposits.

Market Share
Iran, which blamed Saudi Arabia for stealing market share earlier this year when sanctions began to hobble its own exports, is in agreement with the desert kingdom that current prices are adequate.

“The market situation is good,” Iranian Minister of Petroleum Rostam Qasemi told reporters as he arrived at his hotel in Vienna yesterday. “The price is OK for the moment, not too high but OK.”

Saudi Arabian Oil Minister Ali Al-Naimi hasn’t commented on OPEC policy since he arrived in Vienna Dec. 10.

“The prices are fine, and customers are happy” Al-Naimi told Bloomberg reporters in Doha on Dec. 7. “Everything is well supplied.”

U.S. crude oil production will climb 640,000 barrels a day to 7.1 million next year, the highest level since 1992, the Energy Department said yesterday in its monthly Short Term Energy Outlook.

Saudi Supply
Saudi Arabia has been unilaterally reining back in recent months meantime, curbing crude output to a 13-month low of 9.67 million barrels a day last month, according to a monthly report from OPEC yesterday that cited secondary sources for its data.

In its own direct communication to OPEC, Saudi Arabia said November production was even lower, at 9.49 million.

“It will not take long, in our opinion, for Saudi Arabia to make again the statement that they do not see the demand hence they are reducing exports simply because the customers are not asking for more,” Olivier Jakob, managing director of Switzerland-based researcher Petromatrix GmbH, said in a note.

Along with declining flows in Nigeria, total production from all 12 OPEC nations slid to an 11-month low of 30.78 million barrels a day last month, the OPEC report showed. That’s still more than the group’s official quota and about 1.03 million barrels a day more than the projected average demand for OPEC crude next year, the report said.

Do Nothing
“The market is well balanced,” U.A.E. Oil Minister Mohamed al-Hamli told reporters in Vienna yesterday. “As long as there is demand for crude oil, there is no need to do anything,” he said, when asked if OPEC should lower its official supply target.

Ecuador’s oil minister, Wilson Pastor, said Dec. 10 that OPEC may decide to leave its group quota unchanged, echoing the unanimous opinion of a Bloomberg survey of 18 analysts last week.

OPEC’s Ministerial Monitoring Committee, an internal panel that monitors production, met yesterday and didn’t reach a consensus on recommending a policy to the full gathering of ministers, Algerian Oil Minister Youcef Yousfi told reporters. Data reviewed by the committee shows that global oil markets are adequately supplied, according to another OPEC delegate who attended the meeting and asked not to be identified by name.

Several ministers, including Qasemi and Al-Hamli, said they hoped OPEC’s selection of a new secretary-general, to replace Abdalla El-Badri, would proceed quickly at today’s meeting. Qasemi reiterated that Iran’s nominee, Gholamhossein Nozari, is still in the race, along with two other candidates: Majid Moneef from Saudi Arabia and former Iraqi Oil Minister Thamir Ghadhban.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

The full ministerial conference begins today at 10 a.m. local time in Vienna, with a press conference tentatively scheduled for 2 p.m. Kuwait and Venezuela will be represented by lower-level officials at today’s meeting.

Source: Bloomberg