OPEC Seeks to Avoid Oil Output Cheating Row
Early arrivals for today's meeting on third quarter output policy, played down concerns about unofficial leakage that has neutralized their latest round of restraints, in place since January.
"It is reasonable," said OPEC President Rilwanu Lukman of current compliance with quotas.
Still, production cuts have been enough to lift oil prices $5 since the beginning of the year and on Monday Benchmark Brent, pushed higher by Middle East violence, rose 52 cents to $25.25 a barrel.
But the temptation to leak extra crude is growing among OPEC producers, holding back six million barrels a day of spare capacity from the 75 million bpd world market, Reuters reported.
Most independent estimates put cartel leakage in May at about 1.5 million barrels daily above official limits of 21.7 million bpd, the group's poorest record on adherence since it reversed a price slump in 1999 with big supply cuts.
Worries center around Venezuela, reported last week to be planning to pump extra supplies to raise cash to patch a fiscal deficit.
Oil Minister Alvaro Silva denied allegations that one of the last acts in his existing post was to order production be lifted to 400,000 barrels daily in excess of Venezuela's quota of 2.48 million bpd.
Caracas is proposing that Silva be posted to Vienna as cartel secretary general, taking over from fellow Venezuelan Ali Rodriguez who is returning home to run the state oil company PDVSA.
"Venezuela is sticking to its promises on production," Silva told reporters.
"The market believes the Venezuelans are producing over quota and Venezuelan cheating raises a question mark against the credibility of Silva as secretary general," said Nauman Barakat of brokers Fimat International in London.
"Officially this meeting is just a rubber-stamping exercise on third quarter quotas but now that the cat is out of the bag on Venezuela, they're going to have to do some damage control." Ministers already have made clear that official output limits will be left unchanged for 10 members, excluding sanctions-bound Iraq, for another three months.
Meanwhile, Saudi Arabian Oil Minister Ali al-Naimi said he was "very relaxed" about the outlook for the oil market, as OPEC ministers gathered in Vienna to discuss output quotas.
"Everything's fitting into place. I'm very relaxed," Naimi, whose country is the biggest OPEC producer, told a small group of reporters on the sidelines of a meeting of the Organization of Petroleum Exporting Countries (OPEC).
With OPEC's benchmark price within its target price band of $22-$28 a barrel, albeit towards the lower end, the 11-member exporter grouping has signaled its intention to leave output quotas unchanged in the third quarter.
Naimi also appeared unconcerned by analysts' estimates that OPEC members are producing up to 1.5 million barrels a day above their combined ceiling -- equivalent to the size of their last output cut.
"I would take those with a pinch of salt," Naimi said of the estimates.
OPEC slashed production last year to haul prices out of a slump triggered by the global economic slowdown and the September 11 attacks on the United States, and says demand is still too fragile for it to raise output.