OPEC set to keep current output targets, urge stricter compliance

September 9, 2009 - OPEC looked unlikely just hours ahead of its September 9 meeting in Vienna to spring any surprises on world oil markets as senior ministers indicated that they saw no need to tamper with current official output targets.

Saudi Arabian oil minister Ali Naimi expects OPEC to maintain the current output level in anticipation of higher demand and a drawdown in consumer stocks, Saudi-owned newspaper al-Hayat reported.

Naimi had already told reporters on arrival in the Austrian capital a day earlier that he saw oil markets as "very stable" and that oil prices in a range of $68-$73/barrel were good for producers and consumers alike.

A key OPEC ministerial panel met late September 8 and agreed to recommend that current oil production limits--set at 24.845 million b/d for the 11 members bound by quotas and excluding Iraq--be left in place for the time being.

But the committee will urge OPEC to call for stricter compliance with these limits.

A Platts survey of OPEC and industry officials and analysts on September 8 estimated production by the 11 OPEC members bound by quotas at 26.24 million b/d in August, leaving them some 1.4 million b/d above their combined target level and implying a compliance rate of 66.8%, down from a level of close to 82% in March.

A big concern for OPEC has been the high level of oil inventories in the industrialized countries.

The International Energy Agency said in its August report that OECD industry stocks stood at nearly 62 days of forward cover at the end of June, eight days above the five-year average and well above the 52-53 days that OPEC prefers.

But Algeria's Chakib Khelil said the global oil industry was becoming accustomed to high industry stocks.

He noted that oil prices were "improving" despite the high stock levels and predicted that stock levels would stabilize over the next six months.

A senior gulf source also said the oil industry was getting used to higher stock levels.

He said that there had been "a noticeable change in consumption patterns in the OECD over the last four years" but that this was not affecting the price of oil. "They are moving independently of one another," he said.

US light crude futures closed at $71.10/barrel in New York on September 8, more than $3/b up, thanks initially to a bear assault on the US dollar with technical buying providing further support.