Opec unlikely to tinker with production level

Opec, the supplier of 40 per cent of the world’s oil, will probably keep producing at a near record pace as $107-a-barrel crude squeezes the global economy.

“Nothing significant,” Nigerian Petroleum Minister Odein Ajumogobia responded, when asked by Bloomberg News today what Opec was likely to decide at a meeting in Vienna tomorrow.

“Our position is to leave everything unchanged,”’ Ecuador’s Energy Minister Galo Chiriboga told reporters in the Austrian capital yesterday. “The market is well supplied.”

The 13-nation Organisation of Petroleum Exporting Countries will keep production unchanged, according to 29 of 32 energy analysts surveyed by Bloomberg last week. Iran and Venezuela will urge the group to trim supplies to prevent oil prices from retreating below $100 a barrel.

“They want to prevent a build-up of crude stocks, which rules out an increase, but don’t want to send prices skyrocketing by announcing a cut,” said Mike Wittner, head of oil research at Societe Generale SA in London. “Opec won’t take any formal action.”

Oil has plunged $40 a barrel, or 27 per cent, from its record $147.27 on July 11 as economies slowed, the dollar halted a three-year slide against the euro and Hurricane Gustav caused almost no damage to US drilling platforms and refineries. Demand for crude will increase 1 per cent in 2009, the slowest growth in seven years, according to an August 15 Opec forecast.

Exceeded Quota: The Opec members with quotas produced about 592,000 barrels a day more than their official limit of 29.673 million last month, according to Bloomberg estimates. Iraq has no quota. Output from all 13 members slipped 200,000 barrels a day from July’s record.

All the countries except Saudi Arabia are pumping at close to capacity to meet rising demand and compensate for declining supplies from Nigeria and Venezuela.

While leaving quotas unchanged, the group may curtail production to prevent inventories from swelling, said Adam Sieminski, Deutsche Bank AG’s chief energy economist in Washington.

“If prices are rising, they will leave production alone, and if they are falling, they will trim a little,” he said.

Slower Growth: Record oil prices spurred European inflation to 4 per cent in July and contributed to the first quarterly contraction in the region’s economy since the euro was introduced almost a decade ago. In the US, gasoline demand fell for 19 consecutive weeks, according to MasterCard Inc, with fuel now near $3.70 a gallon.

The world economy is “precariously close” to a recession in 2009, UBS AG said last month as it cut next year’s global growth forecast to 2.9 per cent. It considers a 2.5 per cent rate as one that is consistent with a recession.

Oil for October delivery rebounded from a five-month low in New York today, rising as much as 2.7 per cent to $109.12 a barrel as the approach of Hurricane Ike delayed the resumption of production in the Gulf of Mexico. It was at $107.30 as of 10.50 am in London.