LONDON: Opec gathers in Vienna this week for a ministerial meeting to decide on the cartel’s oil production ceiling, as a predicted drop in demand risks weighing on high crude prices despite Middle East unrest.
The Organisation of Petroleum Exporting Countries, which pumps out 35 percent of the world’s oil, may also finally decide on a new head after a vote to appoint a successor to Opec Secretary-General Abdullah El Badri was postponed in June.
The 12-nation cartel, which includes the world’s biggest oil exporter Saudi Arabia and Iran — currently under an oil embargo — was to hold a regular output meeting at Opec’s headquarters in the Austrian capital on Wednesday.
“Opec’s official production target is unlikely to change at the December meeting,” noted Jason Schenker of Prestige Economics research group. “Nevertheless, there is likely to be a heated debate over who will be Opec’s next secretary-general.”
At its last meeting in June, Opec opted to keep its oil output ceiling at 30 million barrels per day (mbpd) — after agreeing on the level a year ago — and vowed to eliminate over-production.
But the International Energy Agency watchdog said Opec has failed to rein in excess supplies, estimating that it had pumped 31.16 mbpd in October despite a sharp drop in output by Iran, which has been under a Western ban of its oil exports since July over the Islamic Republic’s disputed nuclear programme.
Despite the over-production caused largely by Saudi Arabia, “no change to production policy is likely in view of the high prices,” said Commerzbank commodities analyst Carsten Fritsch.
Benchmark Brent crude oil futures have traded around $110 a barrel over the past six weeks, above the $100-level deemed acceptable by Opec kingpin Saudi Arabia.
The Centre for Global Energy Studies (CGES) warned that member countries would however “need to be vigilant in the coming months and to act swiftly in response to a weakening market, if they wish to prevent oil prices from falling much below their unofficial $100 per barrel target.”
“The important thing is the outlook... and most analysts expect OPEC to cut its production” next year because of weak demand growth, CGES analyst Manouchehr Takin said.