OPEC eyes market uncertainty at Angola meeting

December 22, 2009
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, LUANDA, Dec 22 – OPEC oil producers were set to hold output steady at their meeting on Tuesday, cautiously looking for a strengthening in the market and playing down the prospect of a surge from Iraq\’s oilfields.

The cartel\’s most influential member, Saudi Oil Minister Ali al-Naimi, said it will hold output quotas unchanged, citing "excellent" crude price levels.

"No change," Naimi told reporters in Luanda, where the ministers of the Organisation of Petroleum Exporting Countries were to meet Tuesday, referring to the emergency quotas brought in a year ago to stabilise oil prices.

"The price is excellent," he said. "We will look at the market, that is all."

The cartel\’s secretary general Abdullah El-Badri said the powerful members of the 12-member grouping must tackle the effects of high crude stockpiles, which observers say could weaken the market when demand falls in the spring.

Observers had said ministers at Tuesday\’s meeting would have one eye on Iraq\’s recovering oil industry and its ambitious plans to ramp up its production to levels that could rival OPEC kingpin Saudi Arabia.

But Iraqi Oil Minister Hussein al-Shahristani told reporters he did not expect to tackle the question of production allowances for Iraq, while stressing its special situation as a country recovering from war.

"I don\’t expect any discussion on setting quotas or even discussing till we reach the point when there is a significant increase of Iraqi production," likely in two or three years, he said.

Iraq is currently exempt from the cartel\’s system of quotas, which seek to limit production by members in order to stabilise prices.

Badri also said a discussion of quotas for Iraq was unlikely to be on Tuesday\’s agenda.

"It will come, but not now," he said. "One day… we will discuss it and surely we will accommodate them."

He spoke after arriving in Luanda for the first meeting hosted by Angola, which joined OPEC in 2007 and has overtaken Nigeria as Africa\’s biggest crude producer, according to the International Energy Agency, but still suffers from the legacy of three decades of civil war.

Angola boosted its international profile when it joined the exclusive 12-member organisation, but millions of Angolans still live in poverty and hunger with little access to clean water.

Tuesday\’s meeting caps a year of recovery for oil prices, which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis a year ago.

"There is a consensus that there is no change" in view for production quotas, Badri said, and raising production levels next year is "not on our radar at this time."

"But if you look at fundamentals, especially inventory… the stocks, they are a bit high," Badri said. "So we have to do something about this."

Compliance with the cuts introduced in January has slipped but observers say that ministers have few real means to enforce it.

"I will ask the ministers to comply more" with the quotas introduced in January, Badri said, adding that he was "not happy" with the current level of around 60 percent compliance.

As ministers looked cautiously ahead for a strengthening of oil consumption next year, a report by the Centre for Global Energy Studies on Monday said demand for oil had dipped in the past month, as stock levels had held firm.

"The market is still volatile," said Shukri Ghanem, the head of Libyan\’s oil company who holds the rank of minister, on his arrival in Luanda. In 2010, he added, "we hope that it will improve."

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