OPEC Expected To Keep Status Quo On Oil Output

(L-R) Executive Director of the International Energy Agency, Maria van der Hoeven, Saudi Arabia Oil Minister Ali al-Naimi, OPEC Secretary-General Abdalla Salem El-Badri at OPEC's 6th International seminar on June 3, 2015 in Vienna ©Joe Klamar (AFP)

OPEC ministers gather Friday for an eagerly awaited meeting which is widely expected to leave its output levels unchanged, despite the recent oil price collapse and global oversupply.

The Organization of the Petroleum Exporting Countries (OPEC), which accounts for a third of the world's oil supplies, will likely pursue its plan to preserve market share and pressure high-cost US shale producers.

AFP reports:

OPEC switched strategy last November when it opted to leave its official collective production target at 30 million barrels per day -- where it has stood for three and a half years -- despite an oil price slump that slashed precious revenues for its 12 member nations.

Cartel kingpin Saudi Arabia's powerful Oil Minister Ali al-Naimi kicked off this week by declaring that the policy had been a success, after the world oil market rallied from six-year lows in late January to above US$60 per barrel.

"You can see that I am not stressed, that I am happy," Naimi said at the start of the week. Questioned about whether the plan was working he replied: "The answer is yes... Demand is picking up. Supply is slowing. This is a fact. The market is stabilizing."

However on Thursday, New York's West Texas Intermediate (WTI) crude and London's Brent oil both fell sharply for a second day as traders fretted that a no-change OPEC decision would further fuel the burgeoning global supply glut.

OPEC is seeking to curb shale and deep-water oil producers that need high prices to make their operations profitable.

Officials this week expressed some frustration with low price levels, but gave no hint that they would move to cut output to tighten supply.

"We are still surviving -- it's not the situation we prefer, of course. It all depends on the second half now for oil prices," Kuwaiti Oil Minister Ali al-Omair told reporters. Asked if he was pleased with the market, Omair replied: "It is improving, of course."

In the run-up to Friday's meeting, ministers declared they would be happier with prices between $75 and $80 a barrel to boost revenues and help balance their budgets.

Angola, Ecuador, Iran, Iraq and Venezuela have all appealed for higher prices, but Saudi Arabia has expressed contentment with OPEC's strategy.

- Market collapsed by 60% -

The global oil market, plagued with demand worries, oversupply and booming US shale output, collapsed by around 60 percent between June 2014 -- when WTI crude stood at about US$106 per barrel -- and late January, when it hit a six-year low under US$45.

Losses accelerated in November following OPEC's change in policy, but some analysts say the strategy has paid off as US shale oil producers have been squeezed and crude has recovered somewhat in recent months, helped also by the brighter outlook for both the world economy and energy demand.

Despite the collective target, OPEC is actually producing about 31.2 million bpd according to International Energy Agency data, due to extra supplies from Saudi Arabia and also Iraq which has ramped up output in southern and northern areas not hit by Islamic State jihadists.

Analysts fear the market could be further saturated with oil from Iran should Western sanctions be lifted after a nuclear deal with world powers.