Wednesday, November 23, 2011

A Push to Hold OPEC Quotas. 'The Market Is Currently Balanced,' Says the Oil Cartel's Secretary General


RIYADH — The world's biggest oil producers are signaling they want OPEC to stick to existing crude-output quotas, as prices have remained lofty.

The statements by top oil officials from Saudi Arabia and Iraq and by OPEC's secretary general this week represent a shift in stance. As recently as September, the Organization of Petroleum Exporting Countries hinted in an oil-market report that some members could reduce production if the debt problems plaguing Europe create ripple effects that cut demand and if Libya rapidly resumes exports.

Neither has come to pass, and oil prices surged 36% from early October to mid-November. On Tuesday, oil futures gained $1.09, or 1.1%, to close at $98.01 a barrel on the New York Mercantile Exchange.

OPEC's reference price, which tracks various crude-oil blends produced by member nations, closely follows the Brent benchmark, which has traded above $100 a barrel for most of the year and on Tuesday jumped 2% to $109.03 a barrel.

The nations OPEC comprises control more than a third of the world's oil supply, and the decisions made by the group trickle down into fuel prices paid by consumers.

"The market is currently balanced," OPEC Secretary General Abdalla Salem el-Badri told reporters. "Prices are comfortable" for both producers and consumers, he said.

Hussain al-Shahristani, Iraq's deputy prime minister for energy, concurred Tuesday, saying OPEC should "roll over," or renew, the production quotas at the next meeting, slated for Dec. 14 in Vienna.

Ali Naimi, the oil minister of Saudi Arabia, the world's biggest oil exporter, said he is "very happy" with oil prices.

While the recovery of Libya's oil output hasn't put much of a dent in prices, it will remain an issue, though it is unlikely to come to the fore in the next OPEC meeting, said John Hall, a London-based oil-industry consultant.

"They can talk about Libya, but they cannot bring a cut, since no one knows when it will actually reach full production," and a new government isn't completely up and running, Mr. Hall said. Libya's interim prime minister on Tuesday unveiled a cabinet, which includes Abdurahman Benyezza, a former Eni SpA executive, as the country's top oil official.

OPEC members splintered in June, with some Gulf states advocating a production boost and an Iran-led group opposing the move because of an uncertain economic outlook. Following the demise of those talks, Saudi Arabia and its allies in the more-moderate wing of OPEC boosted output to offset the loss of Libyan crude.

In recent weeks, some OPEC voices from Iran and elsewhere have sharpened the rhetoric on the need for Saudi Arabia to cut back. Yet on Sunday, Muhammad Ali Khatibi, OPEC governor for Iran, the country holding the group's presidency, played down the risk of a new clash at the December meeting. Mr. Khatibi had recently called on countries that had increased output to make up for lost Libyan production to cut back on those additional barrels, although he didn't mention any country by name. "The latest figures show the reduction has started," Mr. Khatibi said.

Saudi output fell to 9.4 million barrels a day in September after reaching nearly 10 million barrels a day earlier this summer, according to figures posted on the Joint Organization Data Initiative

Several OPEC insiders say the organization could be girding for tougher negotiations in early 2012 in light of rising output from Libya, Iraq and Angola, especially if the global economy doesn't pick up. Mr. el-Badri said Sunday that OPEC members who increased output to compensate for the loss of Libyan oil should make room for the country's output.

In the first half of 2012, demand for OPEC crude is expected to fall by more than 1.3 million barrels a day, compared with the fourth quarter of 2011, to an average of 29.29 million barrels a day, according to the group's latest report. That is lower than OPEC's current production of about 30 million barrels a day.

—James Herron contributed to this article.

Write to Summer Said at and Benoit Faucon at

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