VIENNA — OPEC heavyweight Saudi Arabia has set the tone for this week’s meeting of the 12-nation production group with an unusually clear statement — expect no change; we are content with prices and supply.
“We’re extremely happy with the market,” Saudi oil minister Ali Naimi told reporters late Monday. “It is in a very happy situation.”
The Saudis, who are OPEC’s top producers, usually have their way within the organization. But with U.S. demand for oil lackluster, even traditional price hawks like Iran and Venezuela are happy with present prices near $80 a barrel as the 12-nation organization prepares to make a decision on output Wednesday.
These two countries traditionally are the greatest advocates of tight OPEC supply. But ahead of their meeting there is informal unanimity among OPEC oil ministers that — with the world’s economic recovery feeble at best and crude prices at preferred levels — it’s best not to rock the boat.
That means the ministers will likely agree to maintain OPEC’s formal production target, now at 25 million barrels a day, a benchmark set over one year ago.
OPEC has left its members’ production quotas unchanged since December 2008, when it announced the last of a series of cuts aimed at bringing their output down by 4.2 million barrels per day. The cuts helped engineer a rebound in crude prices, which had collapsed to the low $30s from a mid-2008 high of almost $150 per barrel.
Since the oil ministers last met three months ago, prices mostly have hovered between $70 and $80 a barrel — a range that most OPEC nations have factored into their national budgets this year. That has kept even hardliners Iran and Venezuela on board with other OPEC members.
“OPEC should not take any decision to change production,” Iranian oil minister Masoud Mirkazemi told reporters in Tehran on Monday, echoing comments voiced by Rafael Ramirez, his Venezuean counterpart.
Still, there will be behind-the-scenes pressure on some members to produce less by honoring their allotted targets.
OPEC now is producing a daily 600,000 barrels above its official target — a result of cheating by individual nations on their quotas. While OPEC does not reveal which nations are overproducing, the Paris-based International Energy Agency put overall quota compliance within OPEC at only 58 percent in January.
Kuwaiti oil minister Sheik Ahmed Al Abdullah Al Sabah Ahmad said the Vienna meeting would urge members to keep to their quotas.
Oil prices extended losses below $80 a barrel Tuesday as investors eyed meetings of the U.S. central bank and OPEC for trading catalysts. Investors are looking at this week’s Federal Reserve meeting for any clues about when it may start raising record-low interest rates — a clue that the sputtering U.S. economy may be ready to stand on its own feet.
Benchmark crude for April delivery was down 17 cents to $79.63 a barrel in Asian electronic trade on the New York Mercantile Exchange. The contract slid $1.44 to settle at $79.80 on Monday.
World oil demand is expected to rise this year due to surging economic activity in Asian countries, especially China. The IEA, which advises oil-consuming countries, predicts that the world’s appetite for crude will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than 2009’s 86.5 million barrels.
Still, oil markets remain concerned about shaky demand in the U.S. Crude consumption there and in other top industrialized nations is expected to contract in 2010 for the fifth consecutive year.