Saudi Arabia's oil minister said Tuesday he expected OPEC to keep output steady for the rest of this year, in comments reflecting expectations that crude prices and supply are in sync with the fitfully recovering world economy.
Along with other OPEC oil ministers, Saudi Arabia's Ali Naimi had already indicated that the Organization of the Petroleum Exporting Countries would agree to keep production targets at present levels when the 12-nation group meets Wednesday.
But his subsequent comments indicated that the Saudis — the informal policy setters for OPEC — expected the status quo to prevail for all of 2010 — prices between $70 and $85 dollars a barrel and output at daily output at between 25 million barrels and 26 million barrels.
Naimi told reporters he foresees "no change in OPEC output for the rest of the year." On Monday he described the market as being "in a very happy situation."
The Saudis, who are OPEC's top producers, usually have their way within the organization. But with U.S. demand for oil lackluster, even traditional price hawks like Iran and Venezuela are happy with present prices near $80 a barrel as the 12-nation organization prepares to make a decision on output Wednesday.
"Anything else than a roll-over of the current target production would be a big surprise," said Vienna's JBC Energy, in comments looking ahead to Wednesday.
OPEC has left its members' production quotas unchanged since December 2008, when it announced the last of a series of cuts aimed at bringing their output down by 4.2 million barrels per day. The cuts helped engineer a rebound in crude prices, which had collapsed to the low $30s from a mid-2008 high of almost $150 per barrel.
Since the oil ministers last met three months ago, prices mostly have hovered between $70 and $80 a barrel — a range that most OPEC nations have factored into their national budgets this year. That has kept even hardliners Iran and Venezuela on board with other OPEC members.
"OPEC should not take any decision to change production," Iranian oil minister Masoud Mirkazemi told reporters in Tehran on Monday, echoing comments voiced by Rafael Ramirez, his Venezuean counterpart, and other ministers.
"We're happy with the situation," said Nigerian oil minister Rilwanu Lukman.
Still, there will be behind-the-scenes pressure on some members to produce less by honoring their allotted targets.
OPEC now is producing a daily 600,000 barrels above its official target — a result of cheating by individual nations on their quotas. While OPEC does not reveal which nations are overproducing, the Paris-based International Energy Agency put overall quota compliance within OPEC at only 58 percent in January.
Kuwaiti oil minister Sheik Ahmed Al Abdullah Al Sabah Ahmad said the Vienna meeting would urge members to keep to their quotas. Naimi's comments left open the possibility that OPEC might raise quotas at a later date, to bring formal output closer to real production.
Oil traded above $80 a barrel Tuesday as investors eyed meetings of the U.S. central bank and OPEC for trading catalysts. Investors are looking at this week's Federal Reserve meeting for any clues about when it may start raising record-low interest rates — a clue that the sputtering U.S. economy may be ready to stand on its own feet.
Benchmark crude for April delivery was up 22 cents to $80.02 a barrel in European electronic trade on the New York Mercantile Exchange. The contract slid $1.44 to settle at $79.80 on Monday.
World oil demand is expected to rise this year due to surging economic activity in Asian countries, especially China. The IEA, which advises oil-consuming countries, predicts that the world's appetite for crude will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than 2009's 86.5 million barrels.
Still, oil markets remain concerned about shaky demand in the U.S. Crude consumption there and in other top industrialized nations is expected to contract in 2010 for the fifth consecutive year.
Alluding to the uncertain world economic situation, Algerian Energy Minister Chakib Khelil said he expected crude to fluctuate "in the $75 to $85 range" for the rest of the year.
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