Opec needs more compliance with oil targets
Luanda, December 20, 2009
Opec needs to comply more closely with its oil output targets as the market is oversupplied, the head of Libya's National Oil Corporation has said ahead of its meeting to set policy.
The producer group agreed last year to curb supply by 4.2 million barrels per day (bpd) as recession eroded demand. But compliance with the accord has slipped to 60 per cent from 80 per cent earlier this year, alongside a rally in oil prices and signs of economic recovery.
'The market is oversupplied and therefore we will call for more compliance,' Libya's Shokri Ghanem told Reuters by telephone from Tripoli. 'We have to comply first and then watch the market.'
The comments underline the concern of some in the Organization of the Petroleum Exporting Countries about ample supply, even though oil has rallied to around $73 a barrel, up from below $33 in December 2008.
Increased compliance would amount to a cut in production and OPEC, source of more than a third of the world's oil, would have scope to adjust supply substantially if it adhered more closely to its targets.
The 11 members subject to output targets in November pumped 1.68 million bpd more than their target of 24.84 million bpd according to Reuters data.
But analysts say as long as oil prices hold firm, the chances of compliance becoming an issue at Tuesday's meeting are limited. Given that most members are pumping above target, touching on the issue would open a can of worms.
'Opec does not tend to get involved in public debate when the price is high,' said Lawrence Eagles, analyst at JP Morgan. 'To touch that issue would also involve asking why Saudi has also upped allocations to some refiners in Asia.'
Oil closed above $73 on Friday, within the $70-$80 range that Opec members have repeatedly said is high enough for producers and low enough to avoid damaging a still fragile world economy.
Ghanem added OPEC was unlikely to change its formal output ceiling of 24.84 million bpd at Tuesday's meeting, which has been in place during 2009, as current oil prices were acceptable.
'Do not expect anything. It is not expected any change will take place, only just monitoring the market and calling for more adherence,' he said. 'The price is okay.'-Reuters