OPEC agrees on 30 million b/d output ceiling
By Tamsin Carlisle, Kate Dourian, Joel Hanley, Margaret McQuaile, Richard Swann, Paul Young
December 16, 2011 -
OPEC ministers December 14 agreed on a new crude production ceiling of 30 million b/d that covers all 12 members, including Libya and Iraq, but does not include individual quotas.
Ministers have "decided to maintain the current production level of 30 million b/d, including production from Libya, now and in the future," the oil producer club said in an official communique.
In effectively legitimizing current freewheeling production, the agreement consigns to the past the group's acrimonious failure in June to set output levels for the remainder of 2011 but leaves question marks over exactly how OPEC will act in the first half of 2012.
The deal includes a pledge from members to reduce production voluntarily if this becomes necessary.
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OPEC's communique said "member countries would, if necessary, take steps (including voluntary downward adjustments of output) to ensure market balance and reasonable price levels."
Secretary General Abdalla el-Badri, a Libyan national, told a press conference that "some countries will give ground to Libya so Libya can produce its full output."
Venezuelan oil minister Rafael Ramirez gave slightly conflicting statements on how OPEC members would make room for Libya.
"We are going to reduce the level of production of each country to make space for Libya," he told reporters.
But Ramirez also said the effort to accommodate Libya's rising production would be borne mainly by countries that had boosted supply above previously agreed levels to make up for the shortfall earlier in the year.
"The countries that overproduced have to reduce to make space for Libya," he said.
Libyan production has now reached 1 million b/d and will recover to 1.7 million b/d in the second half of next year, the country's oil minister, Abdelrahman Benyezza, said just ahead of the OPEC meeting.
That suggests other OPEC countries may have to cut output by as much as 700,000 b/d before then.
Credit Agricole analyst Christophe Barret, who pointed out that OPEC's accord did not mean the market would be tighter or more comfortable in the short term but simply maintained the status quo, said that there could be some tension in the months ahead over which countries should be expected to cut back to accommodate Libya.
"With Libya now in the quota this means other members now need to make room. Are we going to see Saudi Arabia, Kuwait and the UAE going to go back to their previous levels or are we going to see all countries contributing?" Barret said.
"This could create new tensions in OPEC next year over who cuts how much, and as a result I expect we will likely see the target broken next year as Libya comes back on, resulting in oversupply of the market," he said.
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