OPEC considers hike in oil output target

OPEC is considering raising its target for crude oil supply by as much as 1.5 million barrels per day (bpd), a delegate to next week’s meeting of the group told Reuters on Thursday.

The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world’s oil, is due to meet in Vienna on June 8 to discuss output and its response to a sharp rise in oil prices that could be a drag on economic growth.

The 11 members of OPEC bound by the group’s targets pumped 26.23 million bpd in May, nearly 1.4 million bpd above their target of 24.84 million bpd, a Reuters survey showed.

Here are some analysts’ and fund managers’ responses:

WILL RILEY, CO-MANAGER, GUINNESS GLOBAL ENERGY FUND:

“It’s not a huge surprise because they do need to raise production. We do expect OPEC to increase production to compensate for the Libyan outage over the rest of this year.

“An increase of 1.5 million bpd is unlikely. OPEC are sensibly trying to keep the oil price within a band of $75/80 to $125 per barrel. They recognize that anything at the upper end of that price range starts to have an effect on demand. They recognize that the world economy continues to be fragile and it’s in no one’s best interest including their own to scupper that recovery.”

“We believe that, over time, OPEC would be very happy to manage the oil price back down below $100 and that something between $80-$100, more likely toward the top end of that range in the shorter term, is what OPEC would be happy to see.”

MARK THOMAS, HEAD OF ENERGY EUROPE, MAREX FINANCIAL:

“Increasing (the) official quota in reality changes nothing. It merely legitimizes increased production to cover lost Libyan output. (The) net effect is zero and does not bring more oil to the market. OPEC is using smoke and mirrors to give the impression they are supplying additional oil. In reality they are not. It makes no difference (to the global economy). They are already doing it (producing oil above quota).”

CHRISTOPHER BELLOW, OIL BROKER, BACHE COMMODITIES:

“If (the delegate) is Saudi, it carries considerable credibility. If it is Ecuador, for example, then it is less convincing. As OPEC are already producing about 1 million bpd over their official quota, any increase might not actually lead to any more oil coming to the market.”

“But I am not convinced that OPEC intends to increase the supply of oil from current levels. I think it will take higher prices than these to lead to a real production hike.”

EDWARD MEIR, SENIOR COMMOTITY ANALYST, MF GLOBAL:

“The markets have not reacted much to the announcement, but we suspect that additional downward pressure could materialize if in fact this turns out to be the case.”