Saudi Arabia, Kuwait, the United Arab Emirates and other Gulf Arab partners who fear that crude prices nearing $115/barrel are slowing economic growth looked at an output increase possibility. However, delegates at the Wednesday summit of the Organization of Petroleum Exporting Countries said merely closing the gap may not be easy. Actual supplies and OPEC’s outdated production may pose a problem as the gap is about 1.4/barrels a day. OPEC’s recent output estimate is 26.2 million bpd while target for December 2008 is 24.84 million bpd. An OPEC delegate said at least they will close the gap between what is produced and official quotas and whether to add more oil on the top or not is still under discussion. Another delegate said the difference will be legitimized but there is no need to add extra oil because demand is not as strong as expected. International Energy Agency Executive Director Nobuo Tanaka said the issue is not only quotas, but real production.
Iran and Valenzuela square it off versus Saudi Arabia. Oil Minister Mohammad Aliabadi, President Mahmoud Ahmedinejad’s close partner represents Iran which is expected to strongly oppose an output increase. OPEC summit Iran envoy Mohammad Ali Khatibi said there is no need to increase OPEC production. It is not fair that the market situation changes to over-supply, he added. Venezuelan Oil Minister Rafael Ramirez said they think the market is in balance and they are not concerned about supply.
It may be too late for OPEC to undermine West’s weak recovery. In a 2010 meeting, it made no move and blamed speculators when oil reached $75/barrel. Saudi said it favored the $127 April 2011 price. There are indications that high prices have reduced demand which increases the possibility of additional output. There are some signals of demand destruction, said Olivier Jakob, Petromatrix’s analyst. He thinks it would make sense for OPEC to return to $75-$80/barrel prices.
Libya, whose leading oil official Shokri Ghanem has defected, will send Omran Abukraa as its representative. Supplies from the country were disrupted since February when rebellion started. The previous price hawk Tripoli will be hushed about OPEC policy.