OPEC Expected to Stick to Output Quotas, Cut Overproduction

By Albert Otti
16:46, September 8th 2008
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Vienna (dpa) - OPEC oil ministers meeting in Vienna on Tuesday are not expected to change official output targets, but experts say that some cartel members might cut overproduction in reaction to weaker global demand.

In its autumn conference, the Organization of the Petroleum Exporting Countries will discuss production levels in the face of falling oil prices.

One barrel of OPEC-produced crude stood at 101.21 dollars last Friday, down from a record 140.73 dollars on July 3 of this year.

Although OPEC members Iran, Libya and Venezuela are calling for production cuts, Saudia Arabia and other big producers might only agree to limit their actual output to get closer to the official levels decided by OPEC, analysts said.

In August, the cartel produced a total of 32.58 million barrels per day of crude, according to analysts' estimates, around 800,000 barrels per day over the official target.

Saudi Arabia accounts for around 700,000 barrels per day of surplus production and would be the likeliest candidate for lowering production, said Eugen Weinberg, Senior Commodity Analyst at Commerzbank AG in Frankfurt.

Countries like Saudi Arabia, the United Arab Emirates and Kuwait will be cautious not to cut production by too much, analysts say.

"They don't want prices to be so high as to damage demand," said Ehsan Ul-Haq, Head of Research at the Vienna-based consultancy JBC Energy.

OPEC members are under pressure to throttle output because high gasoline prices have dampened demand in the United States. There are also signs that Asian demand is weakening.

The US Energy Information Agency estimates that petroleum consumption in the third quarter will be 270,000 barrels per day less than in the same period last year.

Last week, Iranian Oil Minister Gholam Hossein Nozari once again called for the reduction of crude production and the preventing of overproduction by the member states. He also said that the oil price should not go under the 100 dollar level.

"Hawks like Iran and Venezuela expect others to cut production because they finance social spending with high oil prices," Weinberg said.

If OPEC members cut their actual production by around one million barrels per day, and temperatures in the fourth quarter are particularly low, the market could tighten, Ul-Haq said.

OPEC is comprised of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela, with Iraq the only member not accorded an output quota.



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