Opec to maintain limits on oil output

OPEC, producer of a third of the world’s oil, agreed to maintain its production limits and meet again to consider cutbacks to prevent a drop in prices, the group’s secretary-general said.

The Organization of Petroleum Exporting Countries quota of 24.5 million barrels a day will stay in place, OPEC’s Alvaro Silva said in a telephone interview from Vienna, where the group is meeting. OPEC remains concerned rising supplies from Iraq and Russia and a second-quarter drop in use will cause prices to slide. Brent crude lost 1.7% in London on the accord.

Oil prices this year are set for their highest average in two decades because of OPEC restraint and surging demand in China.

Saudi Arabia had been seeking lower quotas, arguing that a weakening US dollar is hurting the nation’s purchasing power and allowing importing countries to absorb higher costs.

“A production cut is likely when they meet in February, especially as everything points to Iraq producing more, as well as non-OPEC countries, such as Russia,’ said John Waterlow, an analyst at Wood Mackenzie Consultants Ltd. in Edinburgh. A cut “wouldn’t have looked good for OPEC” because of high prices.

The Kuwaiti minister has said a reduction of 750,000 to 1 million barrels a day may be needed early next year to balance supply and demand. Brent crude oil slid as much as 49 cents to $28.65 a barrel and was off 45 cents as of 2.52pm on the Petroleum Exchange in London. New York Mercantile Exchange crude sold at $30.62 a barrel.

OPEC since 2000 has sought $22 to $28 a barrel for its index.

Saudi Minister Ali Al-Naimi said the target remains, though the weaker dollar justifies higher prices.