VIENNA (AFP) ― The Organization of Petroleum Exporting Countries meets here this week to decide on the cartel‘s oil output against a backdrop of slowing crude demand and unrest in member nation Libya.
Supplying about one third of the world’s oil, the cartel is expected to maintain its output ceiling of 30 million barrels per day when it meets at its Vienna headquarters on Wednesday, even though it is currently producing under the limit.
OPEC is seen sitting tight, with its dozen members largely appearing satisfied by current market prices for crude, as Brent wins strong support from rising unrest in Libya that has slashed the country‘s output.
Weighing on prices is a reduction in tensions over Iran following the OPEC member’s recent deal with world powers to allow tighter oversight of its nuclear program in exchange for modest sanctions relief.
New York crude in particular is being hit by rising U.S. oil inventories.
OPEC will meanwhile use the meeting of its nation members from Africa, Latin America and the Middle East, to decide also on a new secretary general, or administrative head of the organization that was founded in 1960.
“Oil prices are still well within the range most of the members are comfortable with, so there shouldn‘t be much case for cutting production,” Thomas Pugh, commodities analyst at Capital Economics consultants, told AFP.
On Friday, New York’s main contract, West Texas Intermediate (WTI) for delivery in January, stood at $93.58 per barrel.
Brent North Sea crude for January, the European benchmark, was at $110.93 a barrel.
“If you take an average of these two, we‘re roughly around the level of $100 that Saudi Arabia has been talking about as being the fair price,” noted Harry Tchilinguirian, BNP Paribas’ global head of commodity markets strategy.
OPEC kingpin Saudi, also the world‘s biggest producer of oil, argues that crude at $100 a barrel provides acceptable income for producers without weighing too heavily on consumers.
Ahead of the ministerial meeting, Kuwait Oil Minister Mustafa al-Shamali said he did not expect OPEC to alter its production level.
“I don’t expect it to be changed because the production till now goes with the needs of consumers and that‘s enough,” Shamali told reporters.
OPEC, pumping about 35 percent of the world’s crude, forecasts that global oil demand will stand at 90.78 million barrels per day (mbpd) in 2014.
Energy-monitoring organization, the International Energy Agency, has meanwhile predicted that demand for OPEC crude will drop to 29.10 mbpd next year from 29.89 mbpd currently ― on Libyan unrest and increased competition for the cartel‘s oil.
Libya’s output has plunged to around 250,000 bpd compared with its usual production of 1.5 million amid deadly fighting between radical Islamist fighters and the army.
In any case, OPEC is facing up to increased competition from shale energy ― and has itself said that take-up of the cartel‘s oil will drop periodically until 2017, before rebounding slightly in 2018.
“The biggest challenge is rapid expansion of non-OPEC supply due to shale oil and the corresponding decline of OPEC oil,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
The boom in gas, and to a lesser extent oil, extracted from shale rock found around the world, but especially in north America, has slashed energy costs for many consumers.
But OPEC, grappling with political strains in Iran, still believes it has a huge role to play in meeting the world’s thirst for crude oil, despite also supply constraints.
“Iran is still limited as to how much it can sell and OPEC is unlikely to change its policy before it sees any significant changes in the market conditions,” said Varengold trader Anita Paluch.
The organization will decide in Vienna also on whether to replace Abdullah El-Badri as secretary general after the planned switch was postponed a year ago.
Saudi Arabia is battling against Iraq and Iran for the position of succeeding Badri, who has been the cartel‘s administrative head since 2007.
The grouping had voted last December to re-appoint Badri, who is Libyan, for another year after members failed to agree on a new leader.
