OPEC Requires 100% Quota Compliance Before More Cuts

March 10 (Bloomberg) -- OPEC, supplier of about 40 percent of the world’s oil, needs full compliance with production quotas before discussing a further reduction in output, Qatar’s oil minister said.

“We cannot discuss another cut until we see the compliance at 100 percent,” Qatar’s Oil Minister Abdullah bin Hamad al- Attiyah said in an interview in the capital Doha today. “The first step is to make sure we see full compliance.”

The Organization of Petroleum Exporting Countries is set to examine at a March 15 meeting in Vienna whether members have complied with a December decision to lower output and look at estimates for future crude demand. Saudi Arabia wants OPEC to adhere to its existing output ceiling and opposes a further production cut, al-Hayat reported, citing an unidentified person commenting on the Vienna meeting.

Attiyah’s comments and the Saudi Arabian position cast doubts on expectations that OPEC members will agree to a production cut at the upcoming meeting. OPEC will limit exports again when the group meets in Vienna, according to a survey by Bloomberg News.

As the first simultaneous recession for six decades in the U.S., Japan and Europe slowed demand for oil, OPEC agreed to cut production in September by 500,000 barrels a day. This was followed by a 1.5 million-barrel-a-day cut at an October meeting and a further decrease of 2.2 million barrels a day at its Dec. 17 meeting. Combined, those reductions will total 4.2 million barrels a day, according to OPEC.

“The problem is the demand for oil,” al-Attiyah said. “It is declining. Why should we produce when no one buys it?”

Compliance, Price Band

OPEC members need to reduce supply by an additional 800,000 barrels a day to be compliant with the three production cuts made since September, Abdalla el-Badri, the group’s secretary- general, told reporters in Doha yesterday. OPEC-member compliance was about 80 percent, he said.

Venezuelan Oil Minister Rafael Ramirez and President Hugo Chavez have repeatedly called for the reestablishment of a price band, in which OPEC would boost or cut output to keep oil prices within a given range. While Saudi Arabia, the world’s largest exporter, has yet to express a view, King Abdullah and Oil Minister Ali al-Naimi said last year that $75 is a fair price for producers and consumers.

The group won’t set a price target and “we won’t even think about another price band,” Qatar’s al-Attiyah said.

Prices

Oil prices surged fivefold in five years before peaking at $147.27 in July. In the same period, OPEC output rose 23 percent to a record 32.775 million barrels a day. As the sub-prime crisis spread, freezing credit, prices collapsed 78 percent to a low of $32.40 in December.

Oil for April delivery fell as much as 43 cents, or 0.9 percent, to $46.64 a barrel in electronic trading on the New York Mercantile Exchange today. The contract traded at $46.77 a barrel at 9:49 a.m. London time.

The 11 members with quotas were producing at a rate of 25.39 million barrels a day in February, according to Bloomberg estimates. Their target is to produce 24.845 million barrels a day. Iraq is allowed to produce at will.