As expected, OPEC ministers agreed at a Nov. 12 meeting to keep their daily crude production target at 30 million barrels a day. The 12-nation organization hopes to keep crude prices up, in spite of increased US oil production and a weakened global economy, which OPEC calls the “biggest challenge facing global oil markets in 2013.”
“We see uncertainty in 2012 and in 2013, and we see the world economy is not in good shape,” OPEC secretary general Abdullah Al-Badry told reporters.
Thus far, 2012 has been a good year for the OPEC nations, as crude prices have been both stable and in a favorable range. Crude remains above $100 a barrel outside the US, and between $80 and $90 a barrel in the United States.
“At these prices no one wants to rock the boat,” IHC Cera OPEC analyst Bhushan Bahree told the New York Times.
OPEC representatives are currently in Vienna for a meeting, and agree their nations, which produce 35 percent of the world’s oil, face serious obstacles in the near future as oil production outside the OPEC nations threatens their market share and global influence.
The additional oil production in the United States, which hit 6.5 million barrels a day in September, is having quite an impact on the global oil market. Plus, as the nation recovers from recent war, OPEC member Iraq is not subject to the organization’s quotas and has vastly increased its productions—reaching levels not seen since the late 1990s.
“More production in the U.S. means there is less available for OPEC,” Jamie Webster, an analyst for Washington-based consultants PFC Energy, told the Times.
In fact, IHC Cera forecasts non-OPEC oil producers will increase output by as much as 1.2 barrels per day next year—far more than the demand, which is expected to increase by 800,000 barrels a day.
“If the world ends up with a lot more capacity to produce oil than appetite to consume it, then either OPEC countries have to figure out a way to cut back production or prices will crash,” Michael Levi, an energy fellow at the Council on Foreign Relations, told the Times. “Sometimes OPEC doesn’t make decisions, but individual countries do and then others follow.”
On a higher note, Al-Badry said he believes the White House and House GOP members will reach an agreement to avoid the approaching fiscal cliff. Likewise, at the Vienna meeting he predicted continued economic growth will increase oil demand in America, China, India and other developing countries.
Meanwhile in Vienna, Iranian oil minister Rostam Ghasemi said the Islamic Republic would like to reduce production two million barrels a day below the current OPEC ceiling, but Tehran was willing to accept the current 30 million per-day limit. The nation has been losing hundreds of thousands of barrels in daily oil sales because of international embargoes over its nuclear program.
“The state of the market today is fine, but if OPEC does reduce its production, the state will improve,” Ghasemi said.
Still, Ghasemi said the sanctions were having minimal effects on his country in terms of forcing it to make concessions on a nuclear program some nations believe Iran is using to make weapons of mass destruction—allegations Tehran denies. According to Ghasemi, Iran has cut its financial dependence on oil by 20 percent in the past three years.
“Next year we will do the same,” he said.
The Organization of Petroleum Exporting Countries is comprised of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
