OPEC Ministers Poised to Keep Output Steady With Oil Over $80

March 17 (Bloomberg) -- The Organization of Petroleum Exporting Countries, content with prices over $80 a barrel, has no need to change output at a meeting in Vienna later today, even with oil supplies exceeding consumption, ministers said.

Eleven of OPEC’s 12 members have said the group is likely to keep production unchanged. Oil prices are in the right range and there’s no need to alter output, Saudi Arabian Oil Minister Ali al-Naimi said while his Algerian counterpart, Chakib Khelil, said there is a “50-50 chance” that quotas will be raised at a subsequent meeting in September.

“Although OPEC is prone to pulling surprises, few would bet against a rollover,” Lawrence Eagles, head of commodity strategy at JPMorgan Chase & Co. in New York, said yesterday. “What we need to watch for are signs that the price band is drifting higher and how worried they are about demand pulling away.”

Oil rose above $82 a barrel on the New York Mercantile Exchange yesterday, after rallying 78 percent in 2009 to $79.36. OPEC embarked on the biggest production cut in its 50-year history at the end of 2008 and has maintained those quotas at every subsequent policy-setting meeting.

“The price has stayed very well in the range of $70 to $80, it is in a very happy situation,” Saudi Arabia’s Al-Naimi said when he arrived in Vienna on March 15, adding that he was pleased with quota compliance and foresees no need to change output. “There are no shortages, investment is going on, demand looking forward is going to continue to rise, so everyone is happy.”

Exceeding Limits

OPEC members are set to continue exceeding production quotas even though the group’s own analysis shows it is pumping more oil than is needed by the market. Supply reductions would risk sending prices soaring, endangering the global economic recovery, ministers and analysts said.

OPEC’s current production is 1.5 million barrels a day more than the demand for its crude in the second quarter, the group said in a monthly report on March 10, after analyzing non-member production and global consumption.

“Sooner or later we will have to change the ceiling, but no-one knows when,” Algeria’s Khelil told reporters in Vienna yesterday. “We are going toward higher prices. We are more likely to shift the quota up.”

No Change This Year

Asked whether there will be any need to alter oil market supply at all in 2010, Al-Naimi said: “That remains to be seen. If it stays like the way it is, no. Everything is in balance, that’s what we want.” Later, when asked whether OPEC will need to raise output this year, he replied: “I doubt it.”

OPEC, which supplies about 40 percent of the world’s oil, is meeting as production exceeds its quotas by the equivalent of a supertanker of crude a day. Still, 42 of 44 analysts surveyed last week by Bloomberg predict the organization will maintain its official quota at 24.845 million barrels a day at today’s meeting.

“The sentiment is to maintain decisions taken in December 2008,” Angolan Oil Minister Jose Maria Botelho de Vasconcelos said yesterday at Luanda airport. On arriving in Vienna yesterday, Vasconcelos said oil prices between $80 and $90 a barrel are good and that prices over $90 are too high.

The range suggested by Angola is $10 higher than the $70- $80 level that Saudi Arabia’s Al-Naimi described on Dec. 22 as being the “perfect price, an excellent price for the world.” He spoke in Luanda, where OPEC held its last meeting, and later that day OPEC agreed to keep production quotas unchanged.

New Headquarters

OPEC’s full ministerial meeting tomorrow will be the first to be held at its new headquarters in Vienna.

Oil rallied last year as OPEC curtailed as much as 3.7 million barrels a day of output and the global economy emerged from its worst slump since World War II.

Buoyed by high prices, the group’s members are paying less attention to quotas and achieving only about 53 percent of their promised 4.2 million-barrel-a-day output cutback, according to the March 10 report from the OPEC secretariat.

Iran, Angola and Nigeria are all pumping more than promised, and Saudi Arabia sits on 4 million barrels a day of idle capacity that can be started when demand climbs.

Among OPEC’s 12 members, only Iraq is exempt from limits and Oil Minister Hussain al-Shahristani said yesterday that his country won’t discuss its inclusion in the quota system until Iraqi production exceeds 4 million barrels a day, in about two years time.

Nigeria and Angola are among OPEC members that are exceeding their quotas the most and have a standing request with OPEC to enlarge their entitlement. The organization typically avoids tackling such issues until it makes broader changes. The national quotas are not published on the group’s Web site.