OPEC set for no change to output as price holds

By Amena Bakr and Alex Lawler

VIENNA (BestGrowthStock) – OPEC’s expected no-change decision this week will mask debate over reserves rivalry and whether the group will next year adjust policy to accommodate new Iraqi supplies or add oil to calm a dollar-driven price rally.

Ecuador’s oil minister, holder of OPEC’s revolving presidency, Wednesday told Reuters there was a consensus within the Organization of the Petroleum Exporting Countries to keep policy unchanged at Thursday’s policy-setting meeting.

“Yes, there is a consensus,” OPEC President Wilson Pastor said.

Oil has stayed close to the $70-$80 range Saudi Arabian Oil Minister Ali al-Naimi says is ideal for producers needing to invest in more supplies and not so high it would jeopardize fragile economic recovery.

Pastor said that range could persist for a year, but not everyone is convinced.

This month U.S. crude hit a five-month high above $84 a dollar before easing slightly. Some analysts have seen the potential for a speculative rally as expectations the United States will resort to further economic stimulus drag down the U.S. currency.

A weaker dollar makes dollar-denominated commodities relatively cheap and can fuel speculative buying.

Price moderates, such as Saudi Arabia, which is keen to preserve long-term demand for its extensive reserves, would probably be uneasy if any rally were too rapid.

But those who traditionally have sought a higher price have in the past argued a weaker dollar erodes the value of their petrodollars and justifies a higher oil price.

Venezuela’s Oil Minister Rafael Ramirez said Wednesday he wanted a price of $90-$100 a barrel for next year.

GRADUAL INCREASES?

Analysts have forecast U.S. crude next year will average $83, according to a Reuters poll — very close to its current level..

Oil demand will rise only modestly as economic growth stays subdued, the latest monthly reports from OPEC Tuesday and the International Energy Agency, which represents consumer nations,

Wednesday found.

At the same time, OPEC faces the prospect of an increase in supply from Iraq — the only member of the group that is not yet bound by a supply target.

As it emerges from years of war, Iraq’s oil output has approached 2.5 million barrels per day (bpd). It has, however, signed contracts that could boost its capacity to 12 million bpd by 2017. That would place it on a par with top OPEC producer Saudi Arabia.

Challenges, such as political insecurity, could limit Iraq’s output ambitions, but its gains over the next year have been estimated to be around 600,000 bpd as international firms seek to increase production as quickly as they can.

“There’s a notion that they (OPEC) might well have to make a cut at some point in the next 12 months. Our balances suggest they need to do something probably by the March meeting,” said David Kirsch of consultancy PFC Energy.

Staking its claim for a high OPEC output target, Iraq earlier this month raised its proven reserves estimate by a quarter.

Iran, currently OPEC’s second biggest producer after Saudi Arabia, swiftly responded by raising its oil reserves figure to 150 billion barrels, above Iraq’s figure of 143 billion.

So far OPEC has managed to keep its output policy unchanged for nearly two years since announcing a record production curb of 4.2 million bpd in December 2008.

The extent of the cut has allowed flexibility to informally adjust compliance with agreed targets. According to Reuters latest assessment, OPEC’s output discipline stands at 57 percent.

(Additional reporting by Jon Hemming and Muriel Boselli; Writing by Barbara Lewis; editing by William Hardy)

OPEC set for no change to output as price holds