OPEC Committee Recommends Keeping Quotas Unchanged

By Grant Smith and Maher Chmaytelli

Sept. 9 (Bloomberg) -- The Organization of Petroleum Exporting Countries should maintain existing output quotas and improve compliance when the 12-member group meets today, the group’s production-monitoring committee recommended.

“We need more compliance” with existing production targets, Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah told reporters in Vienna. “I don’t foresee any cut,” he said, when asked at what price level the group might consider a further supply reduction.

Saudi Arabian Oil Minister Ali al-Naimi, who represents OPEC’s biggest and most influential producer, said current oil prices are “good for everybody, consumers, producers,” adding to comments from other members of the group pointing to no change in output. All 26 analysts surveyed by Bloomberg News forecast OPEC will leave production quotas unchanged for a third time at today’s meeting.

Oil rallied from a low of $32.70 in January to peak this year at $75 a barrel on Aug. 25. Crude for October delivery was trading at $71.07 on the New York Mercantile Exchange at 10:49 a.m. in Singapore. Al-Sabah said current prices are “OK” and said a supply cutback is unlikely in the near future even though the market is “oversupplied.”

OPEC’s Ministerial Monitoring Committee met for an hour yesterday evening at the group’s Vienna headquarters to review data on OPEC oil supply and demand. The MMC, comprising officials from Iran, Nigeria and Kuwait, often recommends a course of action for the full meeting of OPEC ministers, which convenes at 9:30 p.m. local time, after dark because the summit falls in the Muslim holy month of Ramadan.

Compliance Percentage

The MMC also recommended no change in quotas when it met before OPEC’s May meeting. OPEC Secretary General Abdalla El- Badri and Iran’s incoming Oil Minister Masoud Mir-Kazemi both left the meeting without commenting.

The group agreed late last year to cut production targets by 4.2 million barrels a day after prices crashed more than $100 a barrel from a record of $147.27 in July 2008.

The 11 OPEC members bound by quotas are currently complying with about 68 percent of their promised cutbacks, Al-Sabah said, adding that “75 percent would be fine.”

Those members, all except Iraq, pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, which indicates quota compliance of about 71 percent. Only Saudi Arabia, Kuwait and Qatar pumped less than their target. Iran, Angola and Venezuela are the biggest quota busters.

Non-OPEC Criticized

Qatari Energy Minister Abdullah bin Hamad al-Attiyah, while backing no change to OPEC’s targets, criticized the lack of support from non-member producers such as Russia.

“We heard a lot of oral support, we would like to see physical support,” from non-OPEC suppliers, Al-Attiyah said as he arrived in Vienna yesterday.

Russia’s oil exports are surpassing those of Saudi Arabia for the first time since the Soviet Union’s collapse as Prime Minister Vladimer Putin exploits OPEC cuts to gain market share.

Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to Energy Ministry data. Saudi shipments fell to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed.

Investors had expected Russian supplies to decline this year after Putin’s deputy, Igor Sechin, told the Organization of Petroleum Exporting Countries in December that his government was ready to limit production to support prices. Instead, the country is providing tax breaks for new fields in Siberia. OAO Rosneft, OAO Lukoil and BP Plc’s Russian venture TNK-BP pumped more to take advantage of a 59 percent gain in prices so far this year.

The extra barrels may undermine OPEC efforts to reduce inventories and keep members from exceeding their quotas after the group meets in Vienna tomorrow. Oil will fall 4.7 percent from the average so far this quarter to $64.50 a barrel in the third, according to the median of 34 analyst estimates compiled by Bloomberg.

To contact the reporters on this story: Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net; Grant Smith in Vienna at gsmith52@bloomberg.net