VIENNA: Facing greater oil demand but possessing limited ability to satisfy it, OPEC countries Wednesday agreed to keep unchanged their output target of 30 million barrels a day.
OPEC Secretary-General Abdullah al-Badry sought to cast the 12 countries’ decision in a positive light.
“We have a very comfortable price and the market is very stable,” he told reporters after an OPEC meeting in Vienna. “So everybody’s happy.”
In fact, OPEC’s move was in part recognition by the oil cartel that most members will not be able to substantially increase output in the short-term, even if the world’s appetite for crude increases as major economies expand and inventories shrink.
The price of oil rose after the OPEC decision, with benchmark Brent North Sea crude for delivery in July climbing 45 cents to $109.97 a barrel in London.
The International Energy Agency, oil consultant to major consuming countries, sees short-term demand rising. But many OPEC members are at their production capacity limits, and there are other problems.
Iran says it can boost output to 4 million barrels a day within months – but remains constrained by sanctions imposed over its nuclear program. Domestic chaos in Libya has reduced its output to less than a quarter of the daily 800,000 barrels it would normally be able to produce. And production from Venezuela and Nigeria has slipped because of economic and political difficulties there.
Iraq is also under threat. Jihadists wrested control of the northern town of Mosul Monday. While the loss of the city has no immediate effect on oil exports, now at over 3 million barrels a day, it adds to concerns over security and the country’s plans to expand oil production.
Sidestepping around another difficulty, the oil ministers agreed to extend Badry for a third year past the end of his normal term in efforts to defuse tensions generated by competing bids for the post by regional rivals Saudi Arabia and Iran.
OPEC still supplies about 40 percent of world demand. But present difficulties leave it to OPEC powerhouse Saudi Arabia and its smaller Gulf allies to make up for increased international needs, along with other major oil producers outside OPEC, such as Russia and the U.S.
The Saudis regularly raise or lower production to meet demand. Now pumping about 9 million barrels a day, they say they could increase that by more than another 3 million barrels if needed.
“In the end it’s the traditional swing producer, Saudi Arabia, that will be meeting any additional demand,” said senior analyst Ehsan al-Haq, of Energy Economics.