OPEC’s output ills mean its job is done, for now

Jun 10 2014, 11:02 IST
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SummaryIt has been a long time since oil consuming countries waited for an OPEC meeting in trepidation.

It has been a long time since oil consuming countries waited for an OPEC meeting in trepidation.

The biggest consumer, US, appears to care less than others, bolstered by its own oil boom, and OPEC itself seems relaxed — despite huge production problems.

Only three years ago things looked dramatically different when Arab Spring unrest knocked out output of OPEC producer Libya. Then the cartel witnessed one of its most heated clashes when it met in Vienna — Iran blocking Saudi Arabia's proposal to increase production to cool prices heading towards $130 per barrel.

Days later that decision effectively triggered a US oil stocks release to help avoid a spike in gasoline prices less than a year before Barack Obama's re-election as president.

Fast forward three years, and OPEC is heading for what promises to be a serene meeting on Wednesday, despite Libya again exporting virtually no oil and Iranian output curbed by sanctions.

Washington, enjoying a steep spike in its domestic oil output, has no message today for OPEC as the shale boom helps to anchor oil prices in a narrow range around $110 a barrel. The cartel's leading producer, Saudi Arabia, enjoying oil prices comfortably over its favoured $100, is in favour of rolling over its current production ceiling.

And the spoiler of three years ago, Iran, is hoping for an easing of restrictions on oil exports, as Washington's punitive mood shifts to Russia after the Ukraine crisis. "It is probably only due to the shale boom and the continuing perception that it will be sustained that oil prices have not broken out to the upside," said David Wech from JBC Energy.

"In the short term, not much is pointing towards a change in fortunes for OPEC."

The Organization of the Petroleum Exporting Countries is set to keep its output target of 30 million barrels per day unchanged when it meets in Vienna. OPEC output is in line with the target and oil prices have stayed above $100 all year.

That is partly because Western sanctions on Iran, oil theft in Nigeria, conflict in Iraq and the almost total loss of Libyan output have cut OPEC's own supplies by more than 2 million bpd on the 90 million bpd world market. "The best solution is to continue with the current ceiling," said a senior OPEC delegate. "Any increase from Iran, Libya or Iraq would be manageable in the second half of the year since there may be

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