OPEC to freeze oil output target as prices near 82 dollars

3/16/2010 10:38:00 AM

VIENNA – OPEC members on Tuesday prepared to announce a freeze in the cartel's oil output ceiling here as crude prices jumped to near 82 dollars.

The Organization of Petroleum Exporting Countries was widely expected to maintain its official oil output quota of 24.84 million barrels a day when it meets in the Austrian capital on Wednesday.

"This is going to be an easy meeting," UAE Minister of Energy Mohammad bin Dhaen al-Hamli told reporters on Tuesday after fellow OPEC member nations said there was no need to change the cartel's official production target.

Members have pointed to high oil inventories, insufficient demand and acceptable crude prices for the reasons why OPEC does not need to change its output ceiling.

"There is no need to raise output ... Kuwait favours maintaining production quota," Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said on Tuesday before heading to Vienna -- home to OPEC's headquarters.

However Kuwait, like other OPEC members, is calling for greater compliance with the cartel's official production ceiling as data shows that the organisation is pumping more than its set target.

"Kuwait will push for more compliance ... that's the major issue" at the upcoming OPEC ministerial meeting, said Sheikh Ahmad.

OPEC members are keen for greater compliance with the official output quota amid concern that demand for oil could weaken as governments look to end unprecedented measures that have put countries on a road to economic recovery.

Although crude oil futures rebounded Tuesday on rising hopes that the Federal Reserve would not rush to raise interest rates, traders said the market remained concerned about the demand outlook in the United States and China, the world's two largest energy consuming nations respectively.

US Treasury Secretary Timothy Geithner on Tuesday warned jobless Americans they face a torrid year ahead, predicting continued high unemployment levels despite advances "sometime this spring."

Markets are also worried that rising inflation in China may cause the Asian power to cool its overheating economy, in turn dampening the nation's demand for energy.

Saudi Arabia, OPEC's de-facto head, on Monday said the cartel did not need to raise output as the market was in balance and current oil prices were pleasing for producers.

The cartel's second largest producer Iran meanwhile said that OPEC should not raise its official output ceiling as there was still no sign of any increase in world demand.

OPEC, which pumps about 40 percent of the world's crude oil, has had an official output level, excluding production by Iraq, of 24.84 million barrels a day since January 2009.

However the grouping of 12 Middle Eastern, African and Latin American oil producing countries, pumped out 26.70 million barrels a day in February, excluding Iraq, according to the International Energy Agency.

Iraq doesn't have an official quota owing to the nation's unrest. Nevertheless its output is rising at a robust pace and is set to climb further after the country recently signed contracts with foreign firms to develop 10 oil fields.

There is meanwhile concern about political tensions in two other key OPEC members, Iran and Nigeria.

Western powers are seeking a way to disrupt Iran's key oil exports to punish the Islamic republic for its nuclear drive, but experts warn a full embargo could hurt the global economic recovery.

In Nigeria, the southern oil city of Warri was hit by two explosions on Monday during talks on an amnesty for former rebel fighters in an attack claimed by the main armed militant group, MEND.

The oil-rich region has been rocked by more than three years of fighting by armed militants demanding a greater share of oil wealth for local communities.

Attacks on oil facilities have slashed Nigeria's crude production by about one million barrels a day, causing OPEC member Angola to overtake the west African giant as Africa's top oil producer.

OPEC comprises Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.