OPEC is keeping its foot to the pedal on production in a bid to drag down oil prices but may be reluctant to rubber-stamp extra supplies by lifting official output limits, Saudi Arabia said today.
Risking a counter-seasonal fourth quarter build in world crude stocks, Saudi will maintain a higher rate of 9.5 million barrels a day in October, said Saudi Oil Minister Mr Ali al-Naimi.
"We will be pumping 9.5 million in October, the allocations are out and our customers know that," Mr Naimi told reporters ahead of a Wednesday meeting of the Organization of the Petroleum Exporting Countries.
"$40 is not low enough. The fundamentals do not support this price and OPEC does not support this price."
With others OPEC at full capacity, the Saudi commitment means the cartel is pumping two million barrels a day above its official 26-million-bpd limit, Mr Naimi said.
High prices so far appear to have little impact on world economic growth, or contained the fastest fuel demand in a generation. But big OPEC producers like Saudi worry that, longer term, oil above $40 could slow fuel consumption by encouraging investment in other energy sources.
Prices remain too high for comfort among energy importing nations. Down since August's record $49.40 a barrel, crude has bounced ahead of the arrival of Hurricane Ivan into the eastern section of US Gulf oilfields. US crude today added another 75 cents to $44.62 a barrel.
OPEC must decide tomorrow whether or not to officially recognize its quota-busting by raising formal output allocations.
Mr Naimi said he saw no point in doing that, given the hard evidence of extra Saudi crude in world markets.
"It's an academic question. Everybody knows OPEC is producing over its quotas," he said.
Keeping quotas unchanged grants OPEC a get-out-of-jail card should prices suddenly fall.
"Leaving quotas as they are gives them the flexibility to trim back when they need to, rather than have to wait until another meeting to adjust down quotas," said Mr Gary Ross, chief executive of PIRA Energy consultancy.
Consumer countries, hoping for oil nearer $30, may prefer the comfort of a commitment on paper in a formal agreement on higher quota limits.
Kuwait suggested a compromise.
"We support increasing production even if by 500,000 barrels (per day) so that we can make the market calmer than it is now," said Kuwaiti Oil Minister Sheikh Mr Ahmad al-Fahd al-Sabah.
Others in OPEC have suggested a one million or a 1.5 million bpd increase and Algeria said it would be content to see allocations up two million, eight percent, to 28 million bpd.
Whatever OPEC decides, it will make no difference to real supply levels, because only Riyadh is capable of adding much more oil.