OPEC may leave oil production unchanged when it meets in three days’ time because signs of a recovery in demand have yet to emerge among the world’s developed economies. The oil market is “a little oversupplied,” Mohamed al- Hamli, the oil minister of the United Arab Emirates, the third- biggest producer in the Organization of Petroleum Exporting Countries, said Oct. 9. OPEC members are all exceeding their allotted quotas after prices surged 78 percent in 2009 and a further 4 percent this year. Fuel demand in the U.S., the world’s biggest oil consumer, dropped 6.4 percent to 18.5 million barrels a day, according to the U.S. Energy Department, the biggest weekly decline since 2004. Oil prices are forecast to slide this week, according to an Oct. 8 survey of 33 analysts by Bloomberg. “I don’t think there will be any shift” in quotas by OPEC, Qatari Oil Minister Abdullah al-Attiyah said in a phone interview yesterday after meeting in Kuwait with ministers from Saudi Arabia and other Persian Gulf nations. “Producers and consumers are happy” with current oil prices, he said. Crude oil closed at $82.66 a barrel in New York last week, about the same level as when the group last met on March 17. Growth in oil demand will be uneven next year, with the International Energy Agency forecasting a 4.3 percent increase in China and a 0.8 percent retraction in Europe’s five biggest countries. OPEC members, which supply 40 percent of the world’s oil, meet Oct. 14 at the group’s headquarters in Vienna. Higher Prices “OPEC wants oil to be around the $80-$100 a barrel bracket, as to risk higher prices may damage the fragile recovery,” Rebecca Seabury, an analyst at Inenco Group Ltd., a London-based energy consultant, said by e-mail on Oct 9. “Although production levels are currently above quota levels, it is unlikely that quotas will be changed unless we see some very strong signs of growth in the economy.” While China’s gross domestic product will grow 8.9 percent in 2011, according to the median estimate in a Bloomberg News survey of 24 economists, the poll shows growth of 2 percent for Germany, Europe’s biggest oil-consumer. OPEC agreed to a record 4.2 million-barrel-a-day cut in production in late 2008 as global demand fell 0.6 percent, the first decline since 1983. Members are now adhering to about 53 percent of that cut, OPEC Secretary-General Abdalla El-Badri said on Sept. 14. Exceeding Output Targets OPEC has raised production 5 percent from a five-year low in March 2009, and now exceeds its own targets by 1.9 million barrels a day, about the same amount as Angola produces. Output from the 12 members was 29.1 million barrels a day in September, according to Bloomberg estimates. Demand for OPEC’s crude will decline from 29.3 million barrels a day in the third quarter of this year, to 28.6 million barrels a day in the first quarter of 2011, before recovering thereafter, according to IEA calculations, which take into account world consumption and non-OPEC supply. The Paris-based agency’s next monthly report is due on Oct. 13. “We don’t want to rock the boat and do something that maybe will have a negative effect on the world economy,” OPEC’s El-Badri said in a Sept. 14 Bloomberg Television interview from Vienna. West Texas Intermediate crude, the U.S. benchmark grade, will average $85 in 2011, according to the median of 23 analyst forecasts in a Bloomberg News survey this month. All of the respondents said OPEC will leave production targets unchanged when oil ministers meet this week. Saudi Minister Oil’s 11 percent rise in the past month to above $80 a barrel is “partly due to speculation,” al-Attiyah said in Kuwait yesterday. Saudi Arabian Oil Minister Ali al-Naimi, representing OPEC’s biggest producer, declined to comment on OPEC policy when questioned by reporters in Kuwait yesterday. Crude in the $70- to-$80 range is “as close to perfect as possible,” he said in April. Saudi Arabia’s King Abdullah has repeatedly said $75 oil is fair for consumers and producers. OPEC may still seek a higher price for its oil given that the dollar is weakening because of speculation the Federal Reserve will sell bonds to revive economic growth, said Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch. Oil is traded internationally in dollars. The Chinese yuan last week climbed to its strongest level against the dollar since 1993. The Brazilian real has rallied for eight straight weeks against the U.S. currency, a decline that the country’s finance minister, Guido Mantega, last month called a “currency war.” “If we continue to see what the Brazilian finance minister described as a currency war, it is likely that OPEC will take notice and will demand a higher price for its oil,” Blanch said in an Oct. 7 interview in London. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. To contact the reporters on this story: Ayesha Daya in Dubai adaya1@bloomberg.net To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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