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OPEC Output Cut in Doubt
Energy

OPEC Output Cut in Doubt

OPEC's policy meeting in December will welcome Indonesia's return as a member, complicating a decision by the producer group on whether to change its oil output target.
After refusing to cut output last year, the Organization of Petroleum Exporting Countries is pumping much more than its target of 30 million barrels per day because of near-record Saudi Arabian and Iraqi production, and smaller increases elsewhere in the group, Reuters reported.
Indonesia's return to OPEC will expand the group's members to 13 and add about 900,000 bpd to OPEC output. That will push OPEC production to almost 32.50 million bpd and in theory calls for the target to be increased.
The matter, though, is controversial for OPEC as raising its target has been bearish for prices in the past and the issue could resurrect the thorny topic of countries' individual output quotas. Crude is trading above $53 a barrel, not far above a six-year low, hurting members' oil revenue.
Indonesia will be OPEC's fourth-smallest producer. The Southeast Asian country pumped 910,000 bpd in August and the 12 current OPEC members 31.57 million bpd, according to the International Energy Agency. Those numbers make the 30-million target look even more out of date, some OPEC delegates say.
"Even if the ceiling was raised, it will be artificial, just on paper," said a delegate. "You are adding something on paper but not in terms of world supply. It will not affect world supply."
A debate on raising the ceiling could open up the controversial issue for OPEC of whether to reintroduce individual output quotas. OPEC ditched quotas, long a source of squabbling, when it set the output ceiling at 30 million bpd from the start of 2012.
Given the changes in members' production levels since then due to events such as the collapse in Libya, growth in Iraq and sanctions removal on Iran, the quota issue remains sensitive and political as market share and national prestige are at stake.
Some OPEC members see the lack of individual quotas effectively as a license for countries able to boost production, such as Saudi Arabia or Iraq, to expand market share.
Iran called on OPEC to reintroduce quotas at the last meeting held in June, although the idea failed to gain sufficient support. OPEC meets to set output policy on Dec. 4.

 

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