OPEC Unlikely to Cut Production at Meeting

By GEORGE JAHN

OPEC unlikely to cut production at meeting

VIENNA, Austria With oil prices still above $60 a barrel, OPEC ministers likely will keep output steady when they meet this week to set strategies for the spring and early summer.

A warmer-than-usual winter in the United States, the worlds largest consumer, has built inventories which should drive prices lower. But worries about disruptions to supply from places like Iran or Nigeria are keeping prices high.

That adds to the dilemma as the Organization of Petroleum Exporting Countries meets Wednesday to look ahead to the traditionally low-demand season sandwiched between winter and the summer driving season.

Certainly the producers that I have talked to are worried about the second quarter, said Peter Gignoux, a London-based independent oil analyst. They see demand tapering off and the prices moving lower. This thought process could be a driver at the meeting.

Venezuelan Oil Minister Rafael Ramirez has called for production cuts in anticipation of lesser demand, but analysts are betting that the 11-member organization will keep output unchanged because of consumer concerns about rising gasoline prices, instability in Nigeria and the threat of attacks on Middle East pipelines.

The Paris-based International Energy Agency estimates that global demand could be nearly 2 million barrels a day lower in the second quarter than in the first three months of the year as warmer weather arrives.

Still, oil producers are worried about sudden demand and OPECs ability to keep pace should Iran be slapped with economic sanctions by the U.N. Security Council over its nuclear program or should terrorists again strike oil facilities in Saudi Arabia and elsewhere.

While OPECs official production ceiling is 28 million barrels a day, the groups members pumped nearly 30 million barrels a day in February, according to industry officials and analysts. That was up 320,000 barrels a day from January.

That rate leaves little cushion for a supply disruption. The IEA said in its most recent monthly report that OPECs usable spare capacity is now about 1.4 million barrels daily, or just 1.6 percent of global oil consumption.

OPEC President Edmund Daukoru declined to speculate last week on whether the cartel would curtail production, but he did say he was concerned about an overhang of supply.

In the second quarter, we forecast an overhang (of supply) of maybe 2 million barrels a day, Daukoru said, maintaining there is not enough refining capacity to handle that amount of supply.

He also said he has no problem with prices of more than $60 a barrel so long as the global economy continues to grow.

A fair price is what the market can sustain, he said.