OPEC to hold quota when oil prices reach $75 Saudi Arabia target

OPEC’s success in more than doubling oil prices since a five-year low in December will probably persuade ministers to maintain production quotas after this week’s meeting.

Reducing shipments beyond record cutbacks last year would endanger the global economic recovery, the Organization of Petroleum Exporting Countries’ president said last week. Oil rose to $75 a barrel on Aug. 25, the price Saudi Arabian King Abdullah says is fair for consumers and producers.

“OPEC countries will be pleased by the price, which they couldn’t have anticipated back in January,” said Edward Morse, the head of economic research at LCM Commodities LLC in New York. “They won’t seriously consider deepening or extending the cuts at this stage. OPEC has taken a lot of oil out of the market, and it’s going to clear the market up.”

Ministers from Kuwait, Iran, Libya, Qatar and Iraq have in the past three weeks made similar comments to OPEC President Jose Maria Botelho de Vasconcelos, signaling they support existing quotas. The group won’t change output at the Vienna meeting, Agence France-Presse reported yesterday, citing comments by Iran’s OPEC Governor Mohammad Ali Khatibi.

All the 26 analysts surveyed by Bloomberg News predicted four days ago the group will maintain its target at 24.845 million barrels a day at the Sept. 9 meeting in the Austrian capital. OPEC supplies about 40 percent of the world’s oil.

Crude oil for October delivery was trading at $68.08 a barrel on the New York Mercantile Exchange at 11:23 a.m. in Singapore, recovering from a five-year low of $32.40 in December.

‘Early Stages’

“OPEC is very aware the economic recovery is in the very early stages and that they need to be careful about that,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “If they cut quotas they’d risk pushing the price up too far, too fast.”

OPEC members have shipped more oil onto the market since April to capture the rise in prices. Saudi Arabia, OPEC’s largest exporter, and other Persian Gulf states are pumping near or below their specified allocation.

Countries from Iran to Venezuela are exceeding their production targets to maintain government revenue, and the states will be encouraged to comply with their agreed limits, an official from a Persian Gulf OPEC member said Sept. 2.

The 11 members bound by targets have increased total production, leaving their compliance rate with the 4.2 million barrel-a-day reductions agreed upon last year at about 70 percent. They supplied 26.055 million barrels a day last month, 1.2 million barrels a day more than the limit, according to Bloomberg estimates.

Tags:  OPEC, OPEC meeting, Saudi Arabia