OPEC set to roll over output amid weak economy, Libya unrest
The OPEC oil cartel meets in Vienna this week, widely expected to hold production levels unchanged as it balances a weak economic outlook and popular unrest in the Middle East which has slashed Libyan output.
The 12-nation group, which pumps 40 percent of the world's oil, meets on Wednesday amid growing fears that high crude prices could further dent faltering world economic growth and energy demand.
The International Energy Agency has already called on OPEC to increase output and prevent another damaging spike in prices, with seasonal demand set to strengthen in the coming summer months in the northern hemisphere.
So far this year, Brent oil prices have soared by about 21 percent, largely as a result of spreading unrest in the crude-producing Middle East and North Africa region -- and particularly in OPEC member Libya.
At the same time, recent downbeat global economic data has suggested that the economic recovery is struggling and this complicates the outlook.
"I would expect OPEC to leave quotas unchanged, rather than raise them, given the growing evidence that global demand is slowing," said Capital Economics analyst Julian Jessop.
"There is speculation in the market that they will be doing something to acknowledge the supply problems in Libya.
"Regardless of what OPEC happens to do ... prices have further to fall," he added, citing recent weak economic data in top oil consumer the United States.
Standard Chartered analyst Helen Henton said "comments from OPEC members to date suggest that OPEC will ... pledge to keep the market well supplied, rather than proposing any formal change in output targets."
OPEC has left its production target at 24.84 million barrels per day (mbpd) since early 2009. The IEA estimates that output stood at 26.15 mbpd in April.
IHS Global Insight oil analyst Simon Wardell agreed that OPEC members were already pumping above the official ceiling to compensate for the Libyan shortfall.
"We expect no change in OPEC quotas once again. Certainly, oil consuming nations would welcome an increase but increasingly, OPEC is responding to market signals outside of the formal quota system," he told AFP.
"We saw that with Libya -- as production there fell sharply through February and March, Saudi Arabia moved to compensate through increased output. All of this occurred outside of the formal OPEC production target system."
He added: "OPEC could take the opportunity to formalise existing output as the new quota but with the possible issues that may arise from this -- how is Libya treated? Who gets extra volumes? -- OPEC will find it easier to roll targets over yet again."
In the run-up to the meeting, Libyan Oil Minister Shukri Ghanem announced that he had resigned and left Libya to join the uprising against Moamer Kadhafi's regime "to fight for a democratic country."
Ghanem, the head of the state-run National Oil Corporation (NOC), has been Libya's representative at the cartel for years.
The gathering also takes place amid fast-moving events in Iran, which is the cartel's second-biggest member after kingpin Saudi Arabia, and currently holds the presidency for the first time since its Islamic revolution in 1979.
Iranian President Mahmoud Ahmadinejad last month briefly took control of the nation's powerful oil ministry, sparking a political row with parliament and speculation he could attend the Vienna meeting in person.
But Ahmadinejad has now appointed close ally Mohammad Aliabadi as caretaker oil minister.
OPEC comprises 12 members -- Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq does not have a production quota.
© 2011 AFP