Published — Thursday 30 May 2013
Last update 30 May 2013 4:57 am
VIENNA: OPEC, enjoying oil at just over $ 100 a barrel, looks set to keep its output policy on a steady course for 2013.
Saudi Arabia, its top oil producer, has already set the stage for a swift and easy deal when oil ministers meet tomorrow and are expected to retain a 30-million barrel-a-day output target.
"Let me tell you this, this is the best environment for the market. Supplies are plentiful, demand is great, balanced -inventories are balanced," Minister of Petroleum and Mineral Resources Ali Al-Naimi said yesterday.
And while the price of oil by historical standards is expensive, it is well below the $ 125 that rang alarms in major consumer countries last year.
"The current price is fair and reasonable," UAE Oil Minister Suhail bin Mohammed Al-Mazroui told Reuters yesterday.
"It's been sustained for some time without impacting the economics of the producers and the countries that are buying the crude. It also encourages investment in future supply," said Al-Mazroui, attending his first meeting of OPEC.
Triple digit oil has also encouraged development of US shale oil, some of which is among the most costly in the world to produce and competes with OPEC's crude.
But Saudi Arabia - holder of most spare capacity in the Organization of the Petroleum Exporting Countries - shows no sign of opening the taps to bring down prices and curtail that output by making it uneconomic.
OPEC, which dismissed it as of little concern a year ago, does not hold a common position on shale. While Al-Naimi welcomes it, his Nigerian counterpart Diezani Alison-Madueke has said it will have a "major impact."
Nigeria, along with Algeria, has already felt the heat from the US oil boom, losing ground in its most lucrative export market and diverting sales to Asia.
Fast-growing exporter Iraq is also fighting for more Asian market share, undercutting regional rival Saudi Arabia.
The United Arab Emirates is the only other OPEC member with significant growth plans. It has the ability to pump 3 million barrels per day (bpd) and plans to increase capacity to 3.5 million bpd by 2017, said Al-Mazroui.
But the minister brushed off any concern of a looming market share battle in Asia.
Saudi Arabia and the UAE were first to arrive in Vienna, with Iraq, Ecuador and Venezuela expected later. The remaining ministers are due today.
Some within OPEC are concerned about the potential for both slow global growth and a dramatic rise in US shale oil to send prices tumbling.
The International Energy Agency forecast this month U.S. shale oil supply will help meet most of the world's new demand in the next five years, leaving little space for OPEC to lift output without risking lower prices.
"We're heading for a problem in 2014 and we'll probably have to make a supply cut," said a senior OPEC source. "And if OPEC were proactive, we'd start to look seriously at individual production allocations."
But the group that pumps a third of the world's oil is not known for contingency plans.
OPEC delegates now say this meeting will not be electing a new secretary general but will merely approve the criteria for prospective candidates to come forward.
And unable for several years to agree individual output quotas, it may need to allocate them if required to cut back heavily and share out reductions.
Until then, Saudi Arabia has assumed the role of market manager - deftly trimming back or raising supply to keep markets in balance and oil at around $ 100 a barrel.
The shale revolution in the United States, still the world's biggest oil consumer ahead of China by a wide margin, has raised hopes among importers that the relentless rise in fuel prices over the past decade may be at an end.
By the end of last year, the United States had recorded the biggest annual increase - 850,000 bpd - in oil output since it first pumped oil in the early 1860s.
Though not in direct response to shale, Riyadh has cut back from a record high reached in 2012 of 10 million bpd to pump 9.3 million bpd in April.
That put OPEC production at 30.46 million bpd, right in line with its calculations for average demand for the group's crude in the second half of the year.
Iran, Algeria and Venezuela - among those with the highest budget breakeven oil prices in OPEC - may still call for supply cuts.
Yet Venezuela, at least, looks set to keep the status quo. Oil Minister Rafael Ramirez has said he will propose that OPEC keep oil production quotas unchanged.