OPEC to Keep Supply Quotas Unchanged, Survey Shows (Update1)

May 22 (Bloomberg) -- The Organization of Petroleum Exporting Countries is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new supply cuts, according to a Bloomberg survey.

Oil has climbed 86 percent from a four-year low at the end of last year, reaching a six-month high of $62.26 on May 20 as OPEC implements record supply reductions to adjust to lower demand and rising stockpiles. The group will maintain a production target of 24.845 million barrels a day when it meets May 28, according to 25 of 27 analysts surveyed.

“Despite sky-high stocks, we expect another OPEC rollover,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “Crude prices that have touched $60 and remain in the mid-to-upper $50s make it hard for OPEC to justify another cut.”

Kuwait’s oil minister and OPEC’s former secretary general said this week that further output curbs are unlikely. Last month the oil minister for Saudi Arabia, the organization’s largest producer and de facto leader, said arranging prices at $50 a barrel was the country’s “contribution” to the world economy. Of the other members, only Iran has publicly advised new cuts at the coming meeting in Vienna.

“I don’t see any indications that OPEC is seriously considering cuts,” former Secretary-General Adnan Shihab-Eldin said in Dubai yesterday. “OPEC does not want prices to be at such a point that it jeopardizes the recovery.”

‘Too Early’

Libya’s representative at OPEC meetings, National Oil Corp. Chairman Shokri Ghanem, said “it’s too early to say” what OPEC will decide.

“We’re still worried about the level of stocks,” Ghanem said today in a telephone interview from Tripoli. “Prices are improving, they are better, but they’re due in part to the speculators who are returning to the market and not only to the economic improvement.”

Venezuela, a member that often joins Iran in recommending lower output, said on May 15 the group should enforce quotas agreed on in December, without calling for new measures.

OPEC will opt for “steady as she goes, with a call for stricter compliance, and a communique acknowledging the economic recession and the possible need to cut output in the future,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in Connecticut.

OPEC’s ability to alter quotas may be limited by its failure to fully implement the series of cutbacks announced since last September. At its last gathering on March 15 the organization resolved to comply with agreed targets before considering fresh restrictions.

No Success

It has not been successful in doing this. The organization said on May 13 that last month it raised production for the first time since July, exceeding the collective quota by 967,000 barrels a day, or 3.9 percent.

The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, down from a revised 82 percent for March, the Vienna-based organization said.

Still, OPEC may yet pay more attention to brimming stockpiles and concerns that demand is unstable rather than current prices, and choose to deepen output cuts, according to two of the survey respondents.

Crude inventories in the industrial economies of the Organization for Economic Cooperation and Development are at their highest since 1993, at 62 days of consumption, according to the International Energy Agency. Before OPEC’s meeting in December, members expressed concern that a level around 57 days was too high.

“OPEC will do the needful and cut by 1 million barrels a day for six months,” said Johannes Benigni, chief executive officer of JBC Energy GmbH in Vienna. “OPEC will be concerned about fundamentals, the build in inventories, rather than prices, as this is what their strategy has been.”