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OPEC readies rubber stamp as ministers say rollover on cards

March 15 - OPEC ministers have their metaphorical rubber stamp readied for another rollover of current official crude output targets at their March 17 talks in the Austrian capital.

Several key ministers have said in the past few days they expect the oil cartel to maintain the current target of 24.845 million b/d for the 11 members bound by quotas, despite overproduction to the tune of close to 2 million b/d.

Arriving in Vienna on March 15, Algerian oil minister Chakib Khelil said he saw no need for OPEC to legitimize the overproduction by raising the formal target, not least because such a move would give the wrong signal to markets.

"I think the economy is looking like it is recovering, I think the dollar is weakening and we still have geopolitical tensions, so I would expect prices to hold pretty well until the end of the year, despite the surplus in supply," he said.

"So you can decide for yourself what [OPEC is] going to do," he said. "I am saying things are going in a good direction on that side, so why would we worry about compliance and why would we change that? That would send the wrong signal," he said.

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Wrong signal

"I don't think [raising the ceiling] it would be a good idea, we'll send the wrong signal if we do that," he said. "We always ask for more compliance but...increasing the [target] would send the wrong signal."

Earlier on March 15, Iran's Masoud Mirkazemi told reporters in Tehran that OPEC was unlikely to adjust quotas.

"Our prediction is that there will be no decision to change output," he said. "Market demand is not high. The stockpiles have not decreased that much. They have decreased but not to a favorable level for producers," he said, adding: "Given these conditions, the Islamic Republic's opinion is that they should not increase production."

Qatari oil minister Abdullah al-Attiyah was quoted by the Saudi-owned al-Hayat newspaper on March 13 as saying he believed OPEC's current output target was appropriate and that he expected ministers to leave output unchanged.

"I don't see any fundamental change to the production level at this meeting and I believe the decision will be to extend the current agreement while agreeing to watch the oil market very carefully," he said.

Attiyah said that although consumer stocks were high, oil prices were at levels that limited the cartel's options, "which is why we will maintain the previous agreement and not change anything."

OPEC's Vienna secretariat last week said current production, which it estimated at 29.356 million b/d in February, exceeded projected demand for OPEC crude in the traditionally low demand second quarter by around 1.5 million b/d.

"If only part of this surplus were translated into OECD commercial inventories, this would result in further stock build, adding to the already inflated levels of more than 90 million barrels above the five-year average," it said.


The group carried the glum mood into an editorial in its just-published OPEC Bulletin, saying that the $80-$80/b range that had prevailed over the past five months "seems to provide a practical working balance between the interests of producers and consumers" but warning that the oil market faced renewed exposure to severe price volatility because of the lack of action on introducing effective regulation of the financial sector.

However, it said, "at the same time...there is still more talk than action about the introduction of effective regulatory measures in the financial sector. This is leaving oil, as well as other commodity sectors, exposed to new rounds of severe price volatility, which is detrimental to both the oil industry and the world economy at large," it said.

The editorial did not comment directly on the likely outcome of this week's talks but said ministers would be examining the oil market outlook at a time of continuing uncertainty in the world economy.

"There is the growing imbalance between OECD and non-OECD growth, as countries emerge from recession. There are fears of double-dip recession in some cases. There is the gathering debate about the extent and timing of exit strategies from the stimulus packages imposed during the crisis. And there is the realization that overheating in some emerging economies may lead to tougher stands on expansionary policies," it said.

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