"Prices are not expected to go up sharply or down, unless you have an unexpected event such as a hurricane," the source said, adding that given the state of the market, there was no need for a change in OPEC's output targets despite an expected weakening in demand during the third quarter.

The source noted that several of OPEC's member states were stable, citing Nigeria and Venezuela, where tribal unrest in the Niger Delta in the former and political developments in the latter country have at times affected the supply/demand balance.

OPEC last met in Vienna in March and rubber-stamped an existing accord to maintain its overall production target of 24.845 million b/d for the 11 members bound by quotas. Iraq is excluded from the quota agreement.

One potential source of market tension is Iran, OPEC's second biggest oil producer and exporter after Saudi Arabia, given the escalation in the row over its nuclear program, the Gulf source said.

He also said that there was no expected impact on Middle Eastern oil production as a result of the moratorium on offshore drilling imposed by the US administration following the Macondo oil well disaster in the US Gulf.

Offshore drilling was not expected to slow in such countries as Brazil and West Africa, he added. "It will slow down many projects but Brazil and West Africa will continue," he said.

However, Saudi Arabia has slowed down the 900,000 b/d Manifa heavy oil field development project with full capacity now targeted for 2024, much later than earlier planned.

"There is a kind of slowdown [on Manifa]. There is no extra capacity needed. The policy is to keep existing capacity and not add any unless there is anything urgent," the source said.

Saudi Aramco said in its 2009 annual report out earlier this month that Manifa, in shallow waters just off the kingdom's eastern coast, is scheduled to begin production of 500,000 b/d of Arabian Heavy Oil by June 2013 and will ultimately produce at its full 900,000 b/d capacity by January 2024.

The Manifa increment will serve to offset natural declines in other producing fields. Saudi Arabia's current oil production capacity stands at 12.5 million b/d.

--Kate Dourian, kate_dourian@platts.com