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to decide oil output amid demand, Libya strains

Group to take decision with Libya’s situation in mind; new chief also on agenda

The Organisation of Petroleum Exporting Countries, or Opec, meets here this week to decide on the group’s oil output against a backdrop of slowing crude demand and unrest in member nation Libya.

Supplying about one-third of the world’s oil, the Opec is expected to maintain its output ceiling of 30 million barrels per day when it meets at its Vienna headquarters on Wednesday, even though it is currently producing under the limit.

The Opec is seen sitting tight, with its dozen members largely appearing satisfied by current market prices for crude, as Brent wins strong support from rising unrest in Libya that has slashed the country’s output.

Weighing on prices is a reduction in tensions over Iran following the Opec member’s recent deal with world powers to allow tighter oversight of its nuclear programme in exchange for modest sanctions relief.

New York crude in particular is being hit by rising US oil inventories.

The Opec will meanwhile use the meeting of its nation members from Africa, Latin America and the Middle East, to decide also on a new secretary-general, or administrative head of the organisation that was founded in 1960.

“Oil prices are still well within the range most of the members are comfortable with, so there shouldn’t be much case for cutting production,” Thomas Pugh, commodities analyst at Capital Economics consultants, told AFP.

On Friday, New York’s main contract, West Texas Intermediate for delivery in January, stood at $93.58 per barrel. Brent North Sea crude for January, the European benchmark, was at $110.93 a barrel.

“If you take an average of these two, we’re roughly around the level of $100 that Saudi Arabia has been talking about as being the fair price,” noted Harry Tchilinguirian, BNP Paribas’ global head of commodity markets strategy.

Saudi Arabia, also the world’s biggest producer of oil, argues that crude at $100 a barrel provides acceptable income for producers without weighing too heavily on consumers.

Ahead of the ministerial meeting, Kuwait Oil Minister Mustafa Al Shamali said he did not expect the Opec to alter its production level.

“I don’t expect it to be changed because the production until now goes with the needs of consumers and that’s enough,” Al Shamali told reporters. The Opec, pumping about 35 per cent of the world’s crude, forecasts that global oil demand will stand at 90.78 million barrels per day in 2014.

The energy-monitoring organisation International Energy Agency has meanwhile predicted that demand for Opec crude will drop to 29.10 mbpd next year from 29.89 mbpd currently — on Libyan unrest and increased competition for the group’s oil.

Libya’s output has plunged to around 250,000bpd compared with its usual production of 1.5 million amid unrest in the country.

In any case, the Opec is facing up to increased competition from shale energy — and has itself said that take-up of the group’s oil will drop periodically until 2017, before rebounding slightly in 2018. “The biggest challenge is rapid expansion of non-Opec supply due to shale oil and the corresponding decline of Opec oil,” said Carsten Fritsch, senior commodity analyst at Commerzbank.

The boom in gas, and to a lesser extent oil, extracted from shale rock found around the world, but especially in north America, has slashed energy costs for many consumers.

But the Opec still believes it has a huge role to play in meeting the world’s thirst for crude oil, despite also supply constraints. — AFP