No surprises from Opec in Vienna

The 12 members of oil producers’ group Opec agreed in Vienna on 14 December to an oil output ceiling of 30 million barrels a day (b/d), with members cutting output to accommodate increased supplies from a resurgent Libya.

The move should not come as a surprise. Opec production is currently at just over 30 million b/d, the highest levels in three years, and the group has called for maintaining the status quo.

“Opec remains in price-defensive mode and there was no change in key participants’ desire to defend prices at close to current levels,” say analysts at the UK’s Barclays Capital.

On 15 December, European benchmark Brent crude traded at $105.44 a barrel, up $1.46 on the previous day when it lost more than $5. The US’ West Texas Intermediate (WTI) also dropped more than $5 to $94.95 a barrel on 14 December. Average weekly prices for the 12-crude Opec basket fell to $107.29 a barrel, from $109.25. Most energy agencies estimate demand for Opec crude for 2012 at about 30 million b/d.

The US’ Energy Information Administration (EIA) estimates 29.9 million b/d, Opec says 30.1 million b/d, while the Paris-based International Energy Agency (IEA) forecasts 30.2 million b/d), as rebounding non-Opec supply provides a bit of a buffer for oil demand growth.

Attending his first meeting as the newly appointed Libyan Oil Minister, Abdel Rahman bin Yezza said the country is targeting production of as much as 2.2 million b/d in three to five years. Libya’s pre-civil war production capacity was only 1.67 million b/d, according to the IEA. Bin Yezza hopes production will hit these levels again by the middle of 2012.

Iran’s Mohammad Ali Khatibi warned of falling oil prices if the group did not reign in overproduction to accommodate recovering output from Libya and rising volumes from Iraq, according to state-owned Fars News agency Prior to the meeting, Opec lowered its forecast for global oil demand in 2012 to 88.87 million b/d, down from previous estimates of 89.1 million b/d.

“The adjustment reflects slowing growth in the OECD [The Organisation for Economic Cooperation and Development], which is expected to have spillover effects for China and India, and hence impact oil consumption over the coming year,” says Opec in its monthly report.

Average demand for 2011 is forecast at 87.80 million b/d, just a fraction down from the 87.81 million b/d forecast in November.Opec maintained its global economic growth forecasts for 2011 and 2012 at 3.6 percent, noting that this was in large part due to the developing world, which “has compensated” for lower demand in the OECD. Concerns over the Eurozone economy remains “the centre of uncertainty,” for the oil market in 2012, says the report.