OPEC oil ministers signaled today that they will opt to stick to present output targets at their meeting later in the day while remaining undecided on who should fill a senior post coveted both by Saudi Arabia and arch-rival Iran.
The 12-nation cartel is pushing out more than 31 million barrels a day over 1 million barrels more than it should if member nations were honoring individual quotas. That output is the highest in four years, when calculated over 12 months.
Robust US production and anemic world demand due to flagging economies have added to the mix, resulting in unusually high crude inventories and OPEC predictions of even less demand next year.
Yet prices remain relatively high. The average cost of the group's oil basket a mix of grades produced by OPEC countries has been above $100 a barrel for the last two years, a first in OPEC's history. Brent crude, which is used to price international varieties of oil, has also been well over $100 a barrel for this year.
Such levels cover production costs for most OPEC countries with room for profits, meaning OPEC ministers are unlikely to see a need to cut back.
United Arab Emirates Energy Minister Mohamed bin Dhaen Al Hamli confirmed those expectations, saying Wednesday that present OPEC production "is reasonable," adding: "If the market needs more, we are happy."
An increase in production would deal a heavy blow to the world economy, which remains weak despite signs of a halting recovery in the United States and a bottoming out in the downturn in China.
Reducing output now would spike prices, endangering the fragile recovery and further cutting back on the world's oil consumption.
Then there is the "fiscal cliff." The US risks slipping into recession if hundreds of billions of dollars in expiring tax cuts and automatic spending reductions take effect on January 1.
Mideast tensions focused on Syria, Israel and the Palestinians and Iran's nuclear program could also drive up prices, even without any OPEC cutbacks.
Some ministers suggested OPEC could rethink its stance sometime next year.
"I don't think there is oversupply at the moment, but we tend to look in advance and over the next 12-18 months," said Nigerian Oil Minister Diezani Alison-Madueke ahead of Wednesday's closed meeting. "Particularly with the shale oil that is coming in from the US"
