OPEC secretary general says there’s consensus group will hold oil production targets steady

OPEC sec-gen: Consensus is not to change output

LUANDA, Angola — OPEC looks poised to hold its output steady when it meets in Angola, with a top official saying Monday there is agreement on maintaining the bloc’s production targets as it struggles with cheating within its ranks.

The official, Secretary General Abdalla Salem el-Badri of Libya, also said prices are “very comfortable” for now, reflecting a sentiment sounded by several of the group’s oil ministers ahead of Tuesday’s meeting.

“There is a consensus that there is no change,” el-Badri told reporters when asked about OPEC’s output plans at the meeting in Luanda. Even for next year, he said, changes to output are “not on our radar at this time.”

Oil is trading near the $75 a barrel price OPEC kingpin Saudi Arabia’s oil minister earlier this month described as “perfect.” The challenge for OPEC is to keep prices there as the global economy works to recover.

The bloc last week nudged its 2010 forecast for global oil demand slightly higher, but warned that the market still faces risks because of lingering questions about the world’s ability to rebound from its worst recession in decades. It expects demand to remain weak through the first half of 2010.

“We have to watch the market very carefully now, hoping that 2010 will be better,” Qatar’s oil minister Abdullah bin Hamad al-Attiyah said upon arrival on Monday in the Angolan capital.

OPEC still faces one of its most common and largely insurmountable challenges — keeping its members true to their production targets. As oil prices have rebounded, some of the 12-member group have exceeded their quotas to tap into the higher prices.

The Qatari oil minister said tackling historically high levels of cheating within OPEC would be on Tuesday’s agenda. “We will discuss it tomorrow,” al-Attiyah said.

Crude prices have staged an incredible turnaround in the past year, more than doubling from a low near $35 a barrel to trade to a zone many producing countries say they’re happy with.

Benchmark crude prices were hovering above $73 a barrel by late afternoon in Luanda.

Anemic demand has prevented prices from heading back toward $100 a barrel. That has kept OPEC from drawing blame for stifling early signs of an economic turnaround.

“When the price of oil gets to $80, OPEC obviously recognizes it would inhibit recovery,” said John Hall, chairman of EnergyQuote’s John Hall Associates consultancy in London. “They are concerned. They want to see recovery move ahead.”

The last time the Organization of the Petroleum Exporting Countries adjusted its output targets was December 2008, when the producer group capped a rapid-fire series of cuts that slashed a whopping 4.2 million barrels off the world’s daily oil supply. Those cutbacks were meant to halt a slide from an all-time record near $150 a barrel to the low-$30s in just five months.

Many member countries take advantage of rising prices to pump more than their allotted share, but OPEC hard-liners like Saudi Arabia and some of its Gulf Arab neighbors frown on that because it undermines the group’s efforts to maintain a price floor. Analysts say compliance levels for the group have dropped to a new low of about 60 percent.

Getting members to stick to their agreed-upon output quotas could be tricky so long as prices remain relatively high, analysts say.

OPEC’s poorer members, particularly in Africa and South America, need higher prices than their Arab counterparts to fund development at home.

“At the end of the day, with every $1 increase (in oil prices), you have every reason for a Venezuela or a Nigeria to put extra barrels on the market,” analyst and trader Stephen Schork said.

One option OPEC has is to retool its official output targets to better reflect its own cheating members’ actual production levels, EnergyQuote’s Hall said.

For Angola, OPEC’s newest member, Tuesday’s gathering is a chance to spotlight its emergence as a major player in the oil industry after decades of civil war.

A boom in its petroleum sector has kick-started development efforts like new high-rise building projects in the capital Luanda, though many in the Portuguese-speaking country still are impoverished.