23/05/2009
LONDON/DUBAI, May 22 (Reuters) - OPEC ministers are expected to make no change to oil supply when they meet in Vienna next week as higher prices ease their concerns about overflowing fuel inventories and the deepest fall in demand for years.
Oil has rallied to a six-month high of more than $60 a barrel this week, almost double last December's low and well above the $50 level top exporter Saudi Arabia has said it could live with to help nurse the world economy back to growth. "Of course no reduction. Definitely. It goes without saying," Kuwait's Oil Minister Sheikh Ahmad Al-Abdullah Al-Sabah told Reuters last week.
Leading exporter Saudi Arabia has yet to make any public comment ahead of OPEC's meeting on May 28.
A senior Gulf source said the group would stick to its current targets, but stress the need for full compliance with them.
"It is unlikely that OPEC will change its production ceiling. They will keep it as it is," the delegate said.
When the Organization of the Petroleum Exporting Countries last met in March, oil prices were below $50, but it called only for better adherence to existing output curbs, rather than making new ones.
Producers say $75 a barrel is needed to encourage investment in new production over the long term, but for now their more pressing concern is the global economy.
Core Gulf OPEC members want any future price rise to be based on sustained demand growth driven by economic strength, rather than on a short-term supply shortage engineered by OPEC.
"For some in OPEC, prices much higher than where they are now are a threat to recovery," said David Kirsch, director of market intelligence services at PFC Energy in Washington.
"Damaging the recovery would make them look bad. And a core element of the group really wants to see economic recovery that in turn allows demand to recover and bring the price up."
Sadad Al-Husseini, a former top official at state oil giant Saudi Aramco, said the economy and the improved relationship between OPEC and the United States under Barack Obama were still key.
"OPEC is not going to harm that and the global economy by reducing supplies," he said. "If it ain't broke, don't fix it."
OPEC delegates speaking anonymously took a similar view.
"I think with the level of prices, nobody is talking about a cut," said one. "As long as prices remain at or above $55, I don't think they will act."
But he underlined the need for discipline. Although compliance is still close to record levels, some sources have estimated it has slipped below 80 percent. OPEC's latest monthly report pegged it at 77 percent.
