Nigeria and other members of the Organisation of the Petroleum Exporting Countries (OPEC) will this Wednesday consider raising crude supply for the first time since 2007 in a move that could weaken $100 oil prices and lessen the drag of high energy costs on global economic growth.
The oil exporting group, which pumps more than a third of the world’s oil, may raise supply targets by as much as 1.5 million barrels per day (bpd) when ministers meet on June 8, a delegate said on Thursday.
Although Nigeria is yet to name leader for its delegation to the crucial meeting, the country, has been clamouring for quota hike. “There is a need for an increase to replace the loss from Libya,” the delegate said. “Oil prices are too high. $100 oil is scaring people.” The most likely outcome of the meeting would be for a rise of 1 million bpd, the delegate added. “That would be calming for prices,” the delegate said.
A target rise of 1 million bpd would result in only a small increase in actual oil supply from the group, the delegate said. That was because part of the rise would simply absorb above-target supply that some members of the group in OPEC were already pumping, the delegate added. The 11 members of the group bound by OPEC production targets pumped 26.23 million bpd in May, nearly 1.4 million bpd above their 24.84 million bpd target.
Raising formal output targets would force OPEC to confront tough issues aside from overproduction. Top oil exporter Saudi Arabia holds most of the group’s spare capacity so is likely produces most of any extra oil supply. Other members would be reluctant to cede their theoretical share of any supply target increase, even if they are already at full capacity. OPEC members Iran , Libya and Venezuela could resist any rise in targets, industry publication Energy Intelligence reported on Wednesday, citing an OPEC insider. Iranian OPEC governor Mohammad Ali Khatibi declined to comment on Thursday on whether the group would agree a production increase in Vienna next week. “We will discuss it in the next meeting,” Khatibi said at a gas exporters group meeting in Cairo when asked whether OPEC would increase supply. “We should see all fundamentals ... all indicators.” Libya, whose top oil official recently defected amid continued bloodshed there, would not want other OPEC members to officially divide its share of the targets, the delegate said. Civil war has cut its exports.
With so many complications, another delegate saw no need for a formal change and said OPEC members could simply flout official targets to meet demand.
“Why bother?” he said. “Everybody is pumping what they want anyway and getting the money they want and more.”
A rise in targets would go against analyst expectations in a Reuters poll for the producer group to leave output unchanged at the meeting.
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