OPEC unlikely to change output at December 22 meeting

November 24 - After an upward spurt in crude prices to $82/barrel in late October spurred talk of a possible output increase at OPEC's December 22 meeting in Angola, the betting is back on a rollover of the current agreement.

Benchmark crudes Brent and West Texas Intermediate appear to have settled back into a $75-$80/b range for the time being, and recent utterances from OPEC ministers and other senior officials suggest that the oil producer club is reasonably satisfied with the status quo.

Raising official current output targets is simply "not on the agenda" for the December meeting, UAE oil minister Mohammed bin Dhaen al-Hamli said earlier this month.

OPEC's latest monthly oil market report in mid-November gave few clues as to the likely outcome of the December meeting.

It raised its forecast of demand for its own crude next year by 110,000 b/d to 28.5 million b/d, citing expectations of higher growth in world oil demand, although this figure nevertheless represents a 200,000 b/d drop year-on-year drop in demand from an upwardly revised -- by 70,000 b/d -- figure of 28.7 million b/d in 2009.

OPEC, which uses secondary sources to monitor its own output, estimated the volume of crude produced by its 12 members in October at 28.993 million and, excluding Iraq, that from its 11 members bound by quotas at 26.523 million b/d.

The OPEC-11 had got off to a good start with their deal late last year to remove 4.2 million b/d of oversupply from the market, but as prices began to improve, OPEC turned up the taps.

OPEC's own estimate of OPEC-11 production in October is 1.68 million b/d higher than the 24.845 million b/d target which came into effect in January and which ministers have rolled over three times this year.

But despite the wide gap between targeted and actual production and OPEC's concerns about weak fundamentals, there is little talk of pushing for increased compliance with the current agreement.

An output cut, either by lowering official limits or by calling on members to adhere more strictly to their individual quotas, seems unlikely, not least because OPEC is anxious not to do anything to endanger the fragile economic recovery.

The Centre for Global Energy Studies, a London-based think-tank founded by former Saudi Arabian oil minister Zaki Yamani, said in its November 23 monthly oil report that it expected oil prices to remain around current levels over the winter as an incipient recovery in demand is balanced by rising non-OPEC production.

But it warned that the group might come under pressure to change its current crude output agreement after the winter.

So while ministers are not expected to take any action on supply in Angola, it said, OPEC "may face a squeeze next year from sluggish demand growth and rising supply, which could put its present agreement under pressure once the winter is over."

As always, of course, the outcome of any OPEC meeting will depend to a large extent on what Saudi Arabia thinks. Way back in late September, Saudi oil minister Ali Naimi said he saw no reason for the group to change the current target.

He has yet to offer a different opinion.

--Margaret McQuaile