52° Good Evening
52° Good Evening

OPEC likely to keep status quo on output

Ministers of the Organization of Petroleum Exporting Countries,

Ministers of the Organization of Petroleum Exporting Countries, based in Vienna, meet this week to determine production levels. They’re expected to maintain 30 million barrels a day. (Jan. 31, 2008) Credit: Bloomberg

OPEC, once the symbol of oil dominance, faces new challenges as its members gather for a ministerial meeting this week on how much crude to pump.

For the 12 oil ministers from countries ranging from Venezuela to Nigeria and Iran, the formal focus of today's get-together is to determine production levels.

The consensus in the markets is that ministers will opt to maintain the status quo as prices for U.S. benchmark oil have traded in a narrow range a few dollars above $90 a barrel.

Brent crude, the reference point for many international oil varieties, is just above the $100 mark some countries OPEC exporters consider the acceptable minimum.

With prices largely at acceptable levels, the ministers are expected to maintain the cartel's target at 30 million barrels a day.

However, members may be asked to cut back on overproduction, now said to be running at nearly 500,000 barrels a day.

On his arrival in Vienna on Tuesday, Saudi Oil Minister Ali Naimi described the status quo as "the best environment for the market."

For analysts at Commerzbank in Frankfurt, that was a clear signal there would be little or no change in policy -- the Saudis are the main driver of OPEC policy.

As such, said a Commerzbank note, it is "unlikely that Friday's OPEC meeting will result in any change to production policy."

Reinforcing that prediction, Libyan Oil Minister Abdelbari al-Arusi told reporters Thursday that Friday's meeting will "maintain the production level and prices." Beyond prices and output, the Organization of the Petroleum Exporting Countries faces other more complex issues, including the ramp-up in shale oil production in the United States.

The rise in shale oil production in the U.S., the world's biggest economy, has an impact on OPEC as the country remains a main market for OPEC. Shale oil, which is extracted from rocks using heat, helped lift the total U.S. output to 7.4 million barrels per day this month.

The Paris-based International Energy Agency says total production could top 9 million barrels a day by 2018, which would mean near self-sufficiency for the United States as well as significantly less dependence on OPEC imports.

It would also swell the U.S. influence on prices that OPEC policies have largely determined in the past.

More news