TEHRAN/VIENNA Dec 9: Opec producer Iran said on Monday the cartel should consider raising official oil output limits while trimming production to cut chronic quota-busting and support crude prices.
In the first public comment by an OPEC official on raising formal output limits, Iranian Oil Minister Bijan Zanganeh said the cartel could lift its 21.7 million barrels per day (bpd) ceiling to reflect part of the group’s quota-busting.
We have two solutions — either legalise part of this unofficial increase or discuss the issue in the March meeting, he told reporters on the sidelines of an energy conference in Tehran ahead of Opec’s meeting this week.
The reality is that the market is oversupplied, said Zanganeh. We have enough supply in the market and we do not need any increase in supply, probably we should discuss a decrease in supply, Zanganeh said.
Zanganeh’s remarks came after the group’s secretary-general Alvaro Silva said on Friday that Opec was supplying 1.0-1.5 million bpd more than needed on the 76 million bpd world market.
The Organization of the Petroleum Exporting Countries meets on Thursday in Vienna to chart production policy for the first quarter of 2003.
The meeting comes with consumer nations worried that the United States could soon launch an assault on Iraq to oust President Saddam Hussein and send oil prices into orbit. The fear is that a spike in energy costs could stall the world’s fragile economic recovery.
Despite US sabre-rattling, OPEC so far has kept the lid on oil prices after a September peak of nearly $30 by increasing volumes of leakage above official output quotas.
Benchmark Brent on Monday was up 29 cents at $25.75 a barrel because a strike in Opec nation Venezuela, now in its eighth day, has cut back exports severely.
Zanganeh’s comments appear to suggest growing support in Opec for cutting back on unofficial leakage now running at some 2.8 million barrels daily to help keep prices in OPEC’s $22-$28 target price range.
This is the atmosphere of understanding (in Opec) and an issue that we believe we should think about, said Zanganeh.
Some senior Opec officials think the group needs to raise formal quotas to set producers a realistic target for cutting back on their output cheating.
If ministers were to decide, for example, that they were pumping 1.5 million bpd above the market’s needs and breaking current quotas by 2.8 million, they could raise their formal limits by 1.3 million bpd to 23 million bpd.
After months of rising output leakage the group may need to do something like that to restore sceptical oil traders’ confidence in its ragged system of quota supply allocations.
Some ministers, though, happy with oil prices at the middle of their targeted range, have said they would prefer to leave policy alone and keep official output limits unchanged.—Reuters