VIENNA, May 28 – OPEC was set on Thursday to keep its output unchanged at a meeting in Vienna, with hopes of recovering demand for crude and higher prices convincing members to maintain the status quo.
The 12-member oil exporter group believes the market is oversupplied, as shown by the high stock levels, but it seems satisfied with prices after a rally in the last two weeks that has taken crude above 60 dollars a barrel.
On the eve of the meeting, Qatar backed calls by Saudi Arabia, the most influential power in the cartel, to keep the group\’s output target steady at 24.84 million barrels a day.
"They won\’t cut," Qatari Energy Minister Abdullah bin Hamad al-Attiyah said as he arrived in Vienna.
But he warned about unfounded optimism sparked by recent higher prices, underlining that demand for oil was weak as major economies remain mired in recession.
"This price of oil now is functional, but not related to demand and supply. We should not be too optimistic," he said.
On Wednesday, Saudi Oil Minister Ali al-Nuaimi had pointed to signs of increased demand in Asia and the US and implied that a global economic recovery would help absorb current overproduction.
Algeria\’s energy minister has said there is a consensus for no change in output policy by OPEC and even hardline Iran, whose oil minister usually pushes for cuts, conceded that the group\’s production target would remain the same.
"Prices are stabilising or even increasing, so why change (output)?" Algerian Energy Minister Chakib Khelil said as he arrived here on Wednesday.
Crude prices spiked to a six-month high above 63 dollars on Wednesday, before falling back slightly on Thursday, but they remain below the 75 dollars that OPEC members say they want in the longer term.
Economists warn however that higher prices now could delay an economic recovery and OPEC members must balance their desire for higher revenues against the impact expensive energy has on global demand.
The Organization of Petroleum Exporting Countries, which pumps 40 percent of world oil, cut its production target three times late last year to stabilise prices which tumbled from record highs above 147 dollars per barrel in July 2008 to 32.40 dollars in December.
The group seeks to influence prices by setting itself an output quota, with members given individual production targets which are reviewed at regular meetings.
"Although fundamental conditions remain weak, higher prevailing prices as well as continuing concerns about quota discipline outside of the Gulf Arab states makes a roll-over (no change) the most likely outcome," wrote analysts at the PFC Energy consultancy.
OPEC Secretary General Abdalla Salem El-Badri pointed on Wednesday to an improving economic environment as the reason for the recent run up in the crude market.
"We may see at the end of the year a price of 70 dollars a barrel," he added. "I hope we see a recovery. It is coming, but it is going to be very slow."
Venezuelan Energy Minister Rafael Ramirez, a fellow price hawk like Iran, has not called for a reduction in OPEC\’s output target, but he says members should respect their quotas and cut back their overproduction.
As noted by the energy watchdog the International Energy Agency, OPEC members are increasingly surpassing their quota levels, meaning any further output cut would further expose the indiscipline of some members.
PFC said the non-compliance of mainly non-Gulf members had "hamstrung any real discussion of a potential cut" at the meeting on Thursday.
Khelil said Wednesday that OPEC production was 800,000 barrels a day above the target of 24.84 million barrels a day.
"If we complied, I don\’t think the price would be only at 60 dollars. It would be higher," he said.
Oil ministers will meet officially at 0800 GMT.