OPEC looks set to roll over current output ceiling in Vienna
Vienna (Platts)--10Dec2012/756 am EST/1256 GMT
OPEC ministers gathering in Vienna have two tasks ahead of them on
Wednesday: fix crude output policy for the year ahead and appoint a new
secretary general to succeed the outgoing Abdalla el-Badri.
While the 12-member group appears headed for a fairly straightforward
rollover of the current 30 million b/d production ceiling, an agreement on a
new secretary general looks far less likely.
OPEC's current president, Iraqi oil minister Abdul-Karim al-Luaibi, told
reporters in Vienna on Sunday that supply and demand had been in balance over
the past four months and oil prices stable, though he would not predict the
outcome of this week's talks.
"In the last four months, we have seen balance between supply and
demand. Supply and price are stable," he said. "All members of the
organization continue to strive for stability and balance of market and
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"There are changes from quarter to quarter, you have refinery
maintenance periods for example," he added. "The market is stable, but there
is a bit of oversupply this quarter."
Brent crude futures have fluctuated within a $6 range in recent weeks,
NO REASON TO CHANGE TARGET
Earlier Monday, a top Kuwaiti oil official said he also saw a balanced
market and that he did not think OPEC needed to change its current production
target at Wednesday's meeting.
"...I don't think there's any reason to change production levels,"
Farouq al-Zanki, chief executive of state-owned Kuwait Petroleum Corporation,
told reporters in Kuwait City.
"But it's up to them, maybe they see something I do not," Zanki said,
adding that he was expressing his own opinion of the market.
"I think the market is stable with regard to supply and demand. That's
my opinion, and that production will stay where it is today," he said.
Zanki told reporters earlier that acting oil minister Hani Hussein would
not attend the Vienna meeting, but gave no reason. Kuwait currently has a
caretaker government following the resignation of the cabinet last week in
the wake of parliamentary elections.
OPEC kingpin Saudi Arabia has yet to reveal its position, but oil
minister Ali Naimi, who is expected to arrive in Vienna later Monday, said
last month that oil prices were "good," markets in balance and inventories
"I think it's [the market] very balanced. Inventories are comfortable.
The market clearly is in good shape. We are very happy with the situation,"
Naimi said at the time.
"If the recovery is better than what we see today, demand for energy
will go up and petroleum is a part of that," he said.
"If the recovery is on the negative side, and a recession happens, which
I hope doesn't happen, then it will be a little bit of trouble," he said,
adding in a reference to the December 12 meeting: "This is one of the
scenarios we have to look at."
Analysts at JP Morgan said in a note Friday that it saw little room for
OPEC to raise official output levels and also few incentives to cut
"Actual crude production is already running about 1.4 million b/d above
plan, according to our estimates, leaving minimal spare capacity outside the
core Gulf Trio of Saudi Arabia, Kuwait and the United Arab Emirates. So there
is little room to raise official output levels," they said. "There are also
few incentives to cut production. Strong refinery utilization rates indicate
a healthy appetite for crude, even with Brent averaging above $100/b. Hence,
we do not anticipate any major changes to existing policies and production
"While there may be some discussion on adherence to the group's 30
million b/d collective production ceiling, there is likely to be agreement
that the market is reasonably 'well supplied' by the producer group," the
A Platts survey of OPEC and oil industry officials and analysts on
Friday estimated that output from the oil cartel dipped by 90,000 b/d to
31.08 million b/d in November, from 31.17 million b/d in October.
When OPEC agreed the current 30 million b/d ceiling in December last
year, it did not distribute individual country quotas. This approach has
deflected the focus away from individual quota-busters towards countries such
as Saudi Arabia which have greater flexibility to adjust output.
OPEC president Luaibi was asked whether individual quotas would be
discussed this week.
"This is the wrong time to discuss this. According to the policy of
OPEC, we have to watch the market in order to keep it balanced," he said.
Luaibi was also asked when he thought the issue of a quota for Iraq,
whose output is included under the general 30 million b/d ceiling but which
has been outside the quota system since 1990, would come up for debate.
"This is not one of the issues which is on the schedule of this meeting.
We are so far away from this," he said.
DEADLOCKED ON SECRETARY GENERAL
Luaibi also said the group remained deadlocked on the appointment of a
secretary general to succeed Abdalla el-Badri and he warned that failure to
name a replacement could roil global markets.
"This is a very difficult situation," Luaibi told reporters Sunday. "So
far we don't have a solution to this. It is dangerous for the future of the
organization. This condition might affect the oil markets. I want all the
members to understand this danger."
Representatives from OPEC's top three producers -- Saudi Arabia, Iraq
and Iran -- are vying for the organization's top administrative post. Badri,
a former Libyan oil minister and oil industry veteran, is finishing up his
second three-year term as secretary general.
According to Luaibi, OPEC rules do not allow an extension of Badri's
term. There has been speculation, however, that if ministers fail to agree on
his successor, Badri could be asked to stay on while efforts continue to
resolve the issue, or that Kuwait, which will take on the OPEC presidency
next year, could appoint an official to run the Vienna secretariat. Hasan
Qabazard, a Kuwaiti, is OPEC's current head of research in Vienna.
Political rivalries have often complicated OPEC's selection of a new
secretary general. This time around, the race pits OPEC kingpin Saudi Arabia
against rising Iraq, which recently became the cartel's No. 2 producer, and
sanctions-hampered Iran, which dropped to the No. 3 producer.
Iraq has nominated Thamir Ghadhban, the energy adviser to its prime
minister; Saudi Arabia has nominated its OPEC governor Majid Al-Moneef, and
Iran has nominated former oil minister Gholamhossein Nozari.
Ecuador nominated its oil minister Wilson Pastor-Morris, but he
announced his withdrawal from consideration earlier this month.