OPEC to Keep Production Quota Steady a Third Time, Survey Shows

(Bloomberg) -- OPEC will probably leave production quotas unchanged for a third time when it meets in Vienna next week, while urging members to complete record supply cuts announced in late 2008, a Bloomberg survey showed. Oil has gained 54 percent this year, last month reaching the $75 level identified by Saudi King Abdullah as satisfactory for consumers and producers. The rebound in prices may have weakened the Organization of Petroleum Exporting Countries’ determination to drain excess inventories from the market.

All of the 26 analysts surveyed by Bloomberg News before OPEC’s Sept. 9 summit predicted the organization will maintain its target of at 24.845 million barrels a day. Jose Maria de Botelho Vasconcelos, OPEC President and Angolan oil minister, said yesterday the group would hold its current course to avoid higher oil prices derailing the global economic recovery. “Things are proceeding as OPEC would like them to with prices around $70 a barrel,” said Leo Drollas, deputy director of the Centre for Global Energy Studies in London. “If they tighten the taps prices could go much higher and bring the recovery grinding to a halt.”

Ministers from Algeria, Iraq, Kuwait, Libya and Qatar have signaled in the past three weeks that they support the existing quota. Oil traded at about $69 a barrel on the New York Mercantile Exchange today. The 11 members bound by the quota system, all bar Iraq, have collectively increased production for the past five months, leaving their compliance rate with the 4.2 million barrel-a-day reductions agreed last year at about 70 percent. Those 11 states supplied 26.055 million barrels a day last month, according to Bloomberg estimates, compared with a ceiling of 24.845 million.

Spending Commitments
While most members in the Persian Gulf are pumping around or below their specified allocation, other countries with higher domestic spending commitments such as Iran, Nigeria and Venezuela are over-producing. This has frustrated the group’s bid to reduce stockpiles held in the world’s most advanced economies in the Organization for Economic Cooperation and Development.

Inventories in OECD nations equated to about 62 days worth of consumption in June, according to the International Energy Agency. OPEC ministers have said they would like to lower stockpiles to between 52 and 54 days worth of demand. Reaching the goal will take another year if the organization maintains current output and refrains from flouting quotas any further, according to Societe Generale SA.

‘Erode Overhang’
“If they can hold the line on crude production and minimize upward output creep, then as long as the global economy continues to recover demand growth will erode the inventory overhang,” the Paris-based bank’s head of oil research Mike Wittner said.

OPEC hasn’t invited non-members who sometimes attend such as Russia and Oman to the Sept. 9 meeting. Ministers will gather at the group’s headquarters after dark at 9:30 p.m. because the summit falls in the Muslim holy month of Ramadan. The group’s two earlier meetings this year were in March and May. Bloomberg surveyed 26 oil analysts in London and the U.S. this week.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. After next week’s gathering the group is next scheduled to meet in December in Luanda, Angola.