Tags: EU | OPEC | Meeting

OPEC Divided as Saudis Push for Oil Increase

Wednesday, 08 Jun 2011 07:38 AM

OPEC oil producers on Wednesday were split down the middle on whether or not to back a Saudi-led plan to increase supplies and try to cap inflated world crude prices.

Under pressure from consumer countries to contain fuel inflation, Riyadh hopes to convince the Organization of Petroleum Exporting Countries to lift its production target by 1.5 million barrels a day, Gulf delegates said.

As ministers went into closed session, Riyadh had support from its Gulf Arab allies Kuwait and the United Arab Emirates to meet rising demand in the second half of the year.

But five countries - long-time price hawks Iran and Venezuela plus Ecuador, Iraq and Angola - say they see no need to increase output. All want to keep oil prices above $100 a barrel.

Brent crude traded near $116 a barrel.

Iran Will Go With Majority

Iran and Venezuela are expected to provide the toughest opposition to an increase but Iran's acting oil minister Mohammad Aliabadi struck a conciliatory note at the start of the meeting.

"Iran is a member of OPEC and will go with the decision of the majority," Aliabadi told reporters.

"We do not agree with production being increased now, we must continue to consolidate balance in the market and we have to defend fair prices," Venezuelan President Hugo Chavez said on Tuesday in Ecuador.

As OPEC's biggest producer and the only one with any significant spare capacity, Saudi usually gets its way. But it could be a close call.

Apparently backing the Gulf producers are Nigeria and Algeria who sit on a committee that on Tuesday recommended a one-million-bpd increment.

Baseline for Increase

That makes five for an increase and five against. Qatar, which has not spoken, would normally be expected to back its Gulf Arab allies, giving the Saudi group a slim majority.

Libya's representative Omran Abukraa, said to be travelling from Tripoli via Tunisia, has yet to arrive.

As the meeting started it was not clear whether any increase would come on top of current output or OPEC's out-of-date production target, which is much lower.

Delegates said Saudi would prefer to use April OPEC output of 26.33 million bpd as the baseline rather than the old official target of 24.84 million set in December 2008.

If Riyadh gets its way, OPEC would be committing to a real increase rather than a cosmetic one that leaves Saudi to pump more unilaterally outside a deal. An increment of, say, 1 million bpd on top of April output would lift OPEC's official target for 11 members by 2.51 million bpd to 27.35.

Saudi Pumping More Regardless

Regardless of the policy decision, Riyadh will pump more.

A Gulf official said Saudi was already raising output by at least 500,000 bpd in June to 9.5-9.7 million bpd.

Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing. The numbers suggest more oil is required to stop oil prices rising again.

OPEC's Vienna secretariat is forecasting that demand in the second half of the year will be 1.7 million bpd higher than current cartel output.

© 2017 Thomson/Reuters. All rights reserved.

   
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OPEC oil producers on Wednesday were split down the middle on whether or not to back a Saudi-led plan to increase supplies and try to cap inflated world crude prices. Under pressure from consumer countries to contain fuel inflation, Riyadh hopes to convince the...
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2011-38-08
Wednesday, 08 Jun 2011 07:38 AM
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