OPEC set to keep oil output quotas unchanged

OPEC looked poised to hold its oil output quotas unchanged as it met yesterday, with the focus instead on urging some members to stop cheating in a market where an excess of crude and a shaky economic recovery risk undercutting prices.

OPEC looked poised to hold its oil output quotas unchanged as it met yesterday, with the focus instead on urging some members to stop cheating in a market where an excess of crude and a shaky economic recovery risk undercutting prices.

Several ministers from the Organisation of the Petroleum Exporting Countries have voiced satisfaction with current oil prices in the mid $70s.

Ali Naimi, the oil minister from Saudi Arabia, described them as "perfect, perfect", yesterday, while Ecuador's oil minister, Germanico Alfredo Pinto Troya said current prices are "good for everybody, especially producers".

The apparent unwillingness of the 12-member group to adjust its output targets at its meeting in the Angolan capital reflects concerns that any such step could undermine the shaky economic recovery the world is undergoing after its worst recession in over six decades.

It would also likely be counterproductive for the producer bloc where some members are already exceeding their quotas - adding more barrels to the market even as the group has struggled to - undercutting efforts to mop up the surplus of crude in the market.

Compliance has been a traditional nemesis for OPEC, and looks to factor high on the group's agenda yesterday.

"Compliance is a function of sovereign rights, and sovereign rights are sovereign rights," Naimi said yesterday, adding that it was nothing new for some members to be overproducing.

"Even so, we'd like it to be 100percent," said Naimi, whose country sits atop the world's largest proven reserves of crude.

The energy minister for the United Arab Emirates, Mohammed bin Dhaen al-Hamli, described compliance as not good.

"In the past we have had good compliance levels, above 90percent. So it's not difficult," he said. "We need more compliance."

Adhering to quotas is crucial for OPEC, which last week said that 2009 had been one of the worst years ever for oil demand. Increased production by other big producers who are not part of the group, such as Russia, can also hurt OPEC's efforts to support prices.

Oil prices hovered yesterday at slightly below $74 (R560) a barrel ahead of the group's meeting - its last in a year in which they have not adjusted output targets.

Analysts had credited oil's rebound over the past year, despite shaky demand, in part to OPEC's push to comply with the series of cuts it announced late last year that sought to bring down its supply by a whopping 4,2million barrels per day.

But as prices have risen, so too has cheating by some of its poorer members - particularly in Africa and South America.

While it has slightly revised up its demand forecast for 2010, the producer group warned that the market faces risks linked to the pace of the world's economic recovery and that it expects consumer appetite for crude to remain weak for the first half of the year. - Sapa-AP

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