OPEC may raise oil supply targets to calm prices
OPEC is considering raising oil supply targets for the first time since 2007 in a move that could weaken $100 (£60.87) oil prices and lessen the drag of high energy costs on global economic growth.
The Organisation of the Petroleum Exporting Countries, which pumps more than a third of the world’s oil, may raise supply targets by as much as 1.5m barrels per day (bpd) when ministers meet on June 8, two Gulf oil sources have told Reuters.
“There is a need for an increase to replace the loss from Libya,” one delegate said. “Oil prices are too high. $100 oil is scaring people.”
The most likely outcome would be for a rise of 1m bpd: “That would be calming for prices,” the delegate said.
A rise of 1m bpd in OPEC’s output target would result in only a small increase in actual oil supply from the group, the delegate said. That was because part of the rise would simply absorb above-target supply that some members were already pumping, the delegate added.
The 11 members of the group bound by OPEC production targets – all except Iraq – pumped 26.23m bpd in May, nearly 1.4m bpd above their 24.84m bpd target.
“If this is 1m bpd on top of the targets from over two years ago, then it’s meaningless. If it’s 1m bpd above current production levels, then it’s exactly what the market needs,” said David Wech, analyst at JBC Energy in Vienna.
Raising formal output targets would force OPEC to confront tough issues. Saudi Arabia holds most of the group’s spare capacity so is likely produce most of any extra oil supply.
Saudi energy minister Ali Al-Naimi said the country would up production if there was demand for more crude.
But other members would also want a share of any rise in supply targets, even if they were already at full capacity.