High oil stockpiles, slowing demand growth and a fragile world economy would give Organisation of the Petroleum Exporting Countries (OPEC) reason to consider supply cuts when it meets next month, Reuters reported at the weekend. But with turmoil in the Middle East keeping the price of oil well into triple digits, OPEC delegates say the 12-member group is expected to stick with an output target of 30 million barrels per day (bpd) agreed a year ago.
They also hope the OPEC will contain tension over sanctions on Iran that have seen Tehran's output plunge and led Saudi Arabia and Gulf Arab allies Kuwait and the United Arab Emirates to turn up the taps. Indications are that Iran, under tightening US and European sanctions over its nuclear work, is resigned to dramatically lower exports and will fly under the radar at the December 12 meeting in Vienna.
"OPEC is facing a difficult year ahead. The world economy is weak and supply will be running ahead of demand, which could justify a cut of around 500,000 barrels a day," Reuters quoted a senior OPEC delegate from a Gulf producer as saying.
"But political factors will prevent OPEC from taking any formal action." With changes in the output ceiling unlikely, oil market management will be guided by OPEC's leading producer Saudi Arabia - the only member with significant unused capacity - supported by the UAE and Kuwait.
Riyadh has already pulled back from 30-year-high rates of 10 million barrels daily, pumping about 9.7 million bpd in October. That has helped lower overall OPEC production by some 700,000 bpd from its peak earlier this year near 32 million bpd.