OPEC set to delay production decision

OPEC countries looked set to postpone cutting back their oil production target - despite fears of a seasonal dip in demand for crude - as their representatives prepared to meet in Algiers today.

Most of the delegates said as they arrived in the Algerian capital that OPEC members should stop producing above their agreed quotas, rather than reduce the quotas themselves.

When the Organisation of Petroleum Exporting Countries last met in December, several oil ministers predicted making cuts at this meeting to prevent oil prices from falling as a result of warmer weather and a reduced demand for fuel.

Since then, however, a recovering US economy and vigorous growth in China have boosted demand more than many had anticipated.

Iran’s Oil Minister Bijan Namdar Zangeneh argued that OPEC needed to strike a delicate balance in steering a course through the April-June quarter.

“In this situation we should be very careful about the market. We have both high prices and oversupply,” Zangeneh said.

Seasonal oversupply would likely reach three million barrels a day, he said, but “it’s probably better to wait and postpone any decision until March”.

Oil ministers from Libya and Iraq agreed, saying they expected the group to defer any decrease in its official output target until later.

“I don’t think there’s going to be any change immediately – maybe (at the) next meeting,” said Libya’s Abdulhafid Mahmoud Zlitni.

OPEC’s 11 members pump about a third of the world’s oil, with an official production target of 24.5 million barrels a day excluding Iraq, which is exempted from the quota regime while it rebuilds its economy.

But OPEC countries are currently producing about 1.5 million barrels a day more than their output ceiling – a practice ministers say they must stop.

“A decision will be made to rein in this extra production at least through better discipline,” said Algeria’s oil minister, Chakib Khelil.

Although most oil ministers suggested they would not cut quotas, OPEC has taken the market by surprise in the past.

In September, the organisation defied predictions of an unchanged production target by announcing a 900,000 barrel cut in its output ceiling.