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Opec ceiling falls in

07 Dec 2015 10:40 GMT
Opec ceiling falls in

London, 7 December (Argus) — Opec ministers made no recommendation on output at their meeting in Vienna on 4 December, effectively abandoning their 30mn b/d production ceiling, as Argus data show member countries maintained high output levels in November.

"If you want to put a number on it, it is the current production number," Opec president Emmanuel Ibe Kachikwu, who is also Nigeria's minister, says. Argus calculates that Opec produced 31.8mn b/d in November, equivalent to 32.5mn b/d including Indonesia, whose membership Opec reactivated. Iraq increased output by 150,000 b/d to a record 4.25mn b/d last month. "The volumes we are talking about are current actual, not the 30mn b/d," Kachikwu says.

Opec secretary-general Abdullah al-Badri says the group "cannot put a number now" on an agreed production level. "Iran is coming — we do not know when Iran will come — we have to accommodate Iran one way or another," he says. "We will maintain production at current levels," al-Badri says. But "production changes from time to time", so Opec decided to postpone a decision on the agreed level until the next ministerial meeting, which it has scheduled for 2 June in Vienna. "The picture will be clearer for us to decide on a number" by the time of the next meeting, al-Badri says. "Current production is what we are saying we are going to keep at this time," he says. "As we go on, the picture will be more clear. Maybe in the first half of next year."

The statement issued after the meeting simply says Opec will continue to monitor markets. It adds that global gross domestic product growth for 2016 is projected at 3.4pc with oil demand growth of 1.3mn b/d. Non-Opec output is forecast to contract, it says, without saying by how much. "We discussed non-Opec supply. The picture is not clear at this time. We are going to meet in June and look at the situation one more time," al-Badri says. "We discussed everything. We agreed nothing is clear, and we will meet again in June."

Opec's indecision suits the Saudi-led strategy of producing more low-cost oil in the hope of depressing higher-cost non-Opec output. Riyadh would support an Opec output cut in the very unlikely event that non-Opec Russia, Mexico, Oman and Kazakhstan also agree to reduce production, and fellow Opec members Iran and Iraq agree to restrain the expected growth in their output. But Saudi oil minister Ali Naimi is now averse to acknowledging that such a stance amounts to a strategy of defending market share, most likely because he wants to avoid exacerbating strains with Iran, which is seeking to regain the market share it lost over the past four years as a result of US and EU sanctions.

Iranian oil minister Bijan Namdar Zanganeh says Opec's decision-making should not be hostage to whether or not non-Opec producers agree to cut output alongside Opec. "We as Opec try to have a contribution from the non-Opec producers, but it does not mean that we can subject our decision to their contribution," Zanganeh says. And he rejects the notion that Tehran should give in to the dictates of other Opec members on how to boost its output once it is free of sanctions. "We do not need to receive any permission from any organisation to increase our production to what we were producing before sanctions on Iran," he says. The country would be willing to negotiate a new share of Opec output, but only once it has fully returned to the market, he says.

Venezuela had floated a proposal before the meeting to cut output by at least 1.5mn b/d. Venezuelan oil minister Eulogio del Pino said he received backing for the proposal from most participants in a meeting of non-Mideast Gulf members on the eve of the conference. And he warned that without a cut, the oil price could fall by $20/bl before the next Opec meeting in June.

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Opec wellhead production mn b/d
Saudi Arabia10.2610.2810.219.72
*not part of total or ceiling †2012-15

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