OPEC OIL producers have sealed their first new production limit in three years in a deal that settles a six-month argument over output levels firmly in Saudi Arabia’s favour.
The Organization of the Petroleum Exporting Countries agreed a supply target of 30 million barrels daily, roughly in line with current production. It did not discuss individual national quotas.
The agreement caps output for all 12 Opec members for the first half of 2012, but will keep supply close to the highs of the last three years, which is considered enough to rebuild lean global inventories.
“We’re not going to bypass it; we’re going to adhere to it,” said Opec secretary general Abdullah al-Badri of the new limit.
Higher supply from Opec, mostly from Saudi Arabia and its Gulf allies, has kept a leash on oil prices as Riyadh seeks to help nurture global growth by keeping fuel costs under control.
Brent traded near $108 yesterday, down from a year-high $127 in April.
Saudi was angered when its proposal to lift output in June was rejected and responded by pushing output to its highest in decades, more than compensating for lost Libyan output.
It said it pumped 10 million barrels a day last month, in what delegates said was a demonstration of strength to the rest of Opec.
Now Saudi must decide whether to cut back to make room for rising Libyan output or keep the taps open in a bid to bring oil prices down below $100 a barrel.
“Someone has to cut back to accommodate Libya; that has to be done,” said analyst Lawrence Eagles of JP Morgan. “As always with Opec, the proof will be in the pudding. How closely will they stick to the new limit?”
Amrita Sen of Barclays Capital said: “The main issue for Opec now is to accommodate rising Libyan production.
“If the Saudis want to protect prices and maintain spare capacity – an issue which worries the market – then they would need to cut back.”
Price hawks Iran, Venezuela and Algeria, all of whom already pump at full capacity, failed to get a commitment from Saudi and its fellow Gulf producers Kuwait and the UAE to make room for the restoration of Libya’s supply. – (Reuters)
