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Opec keeps oil output target at 30 mln
June 3, 2013, 11:22 am
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Opec oil ministers reached quick agreement last week on keeping output targets steady but deferred solutions on how to deal with surging US shale oil production and internal rivalries denting the organization's image of unity. The 12-nation oil cartel's decision on keeping the status quo on production of 30 million barrels a day was expected. The price for internationally traded benchmark oil is over $100 a barrel, a level most Opec countries are happy with.

That's not the case for Opec's customers. With Europe fighting a stubborn economic downturn and recovery weak in many other parts of the globe, most governments consider oil pricey, as do consumers at the gas pump.

But Opec Secretary General Abdullah Al-Badry said much of the end price was due to add-ons beyond producers' control."'You fill your tank with cost of oil plus taxes," he told reporters. "If governments want to.... do something to the price, they should reduce their taxes."

In a post-meeting statement, the ministers suggested they could hold an emergency meeting on reducing output should market prices fall substantially. Analysts, however, said such a sharp drop in the markets was unlikely in the short run, despite generally tepid global economic growth.

"Geopolitical tensions are holding the price of oil high," said John Hall of Alfa Energy, alluding to turmoil in Syria and tensions over the nuclear program of Opec member Iran. "Opec doesn't have to act; the market is acting for it."

Last week, the price of oil was down slightly, in line with global markets. Brent crude, a benchmark contract for many international oil varieties, was 70 cents lower at $101.49 a barrel on the ICE Futures exchange in London.

Beyond prices and output, the Organization of the Petroleum Exporting Countries faces more complex issues.

The rise in shale oil production in the U.S., the world's biggest economy, has an impact on Opec as the country remains a main market for Opec. Shale oil, which is extracted by combining horizontal drilling with a practice called hydraulic fracturing, helped lift the US's total output to a daily 7.4 million barrels per day this month.

The Paris-based International Energy Agency says US shale oil production could top 9 million barrels a day by 2018, at the same time as Canadian production is also growing. This is expected to sharply reduce the U.S.'s dependence on Opec oil.

It would also hurt Opec's ability to influence market prices. Opec's share of global oil production has been around 40 percent in recent years.

The group's powerhouse, Saudi Arabia, and its Gulf partners have the strength to adjust to cheaper oil prices. Saudi Oil Minister Ali Naimi on Friday called the extra supply from the United States "a welcome addition to the world."

Others, such as Iran, Venezuela and some African producers, disagree, saying they need the price of oil above $100 a barrel to do business.

"We're very concerned, not just for Nigeria but for Africa as a whole," said Diezani Alison-Madueke, Nigeria's minister of petroleum resources. "Africa does need to have its exports continuously going out, particularly to important export destinations such as the U.S."

Sana Abid, an analyst with KBC Energy Economics, said the differing Saudi-Nigerian point of view reflected the "scope for discord" that could hurt the image of OPEC as acting with one voice on oil issues.

"When the stakes are raised, everyone follows their own interests, and shale oil just amplifies this," she said.

 

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