Members seek Opec quota compliance

ARAB oil producers in the Gulf will likely call for quota compliance at Opec's meeting on Wednesday but will not press for output discipline as long as prices remain high, analysts said. "Highly compliant Gulf producers will call for quota discipline, but it will not be a pressing issue at Opec's next meeting since oil price is high, demand is rising and outlook is positive," Kuwaiti oil analyst Mohammad al-Shatti told AFP.

"It starts to become a key issue if the oil price drops sharply," he said.

A majority of officials and analysts have forecast that the Organisation of Petroleum Exporting Countries (Opec) will keep its output quota unchanged at the Vienna meeting, considering positive market sentiment. But questions remain on Opec overproduction.

The cartel's production hit a 14-month high in February at 29.15 million barrels per day (bpd), when output from Iraq, which is not bound by the quota system, exceeded 2.6 million bpd for the first time since the 2003 US-led invasion.

Production of the 11 Opec members bound by quotas reached 26.55 million bpd, 1.7 million bpd above the output quota of 24.845 million bpd adopted in December 2008.

According to Middle East Economic Survey (MEES), the majority of the overproduction came from outside Opec's Arab member states in the Gulf - Saudi Arabia, the United Arab Emirates, Kuwait and Qatar.

Iran and Angola overproduced by 400,000 bpd each in February, while the four Gulf Arab states, whose official quota is 53 per cent of the Opec-11, exceeded their quotas by just 200,000 bpd, according to MEES figures.

Saudi SAMBA group, however, said in its latest report that production discipline will be critical to securing balance in the oil market during 2010.

It said that the oil price is supported by high levels of liquidity, low interest rates, a relatively weak dollar and investors' access to tankers for storage. "Changes in any or all of these elements, particularly the strength of the dollar, could have an adverse impact on (oil) prices," SAMBA said.

Libyan Oil Minister Shokri Ghanem called on March 5 for "quotas to be respected", saying the market is oversupplied.

Oil expert Kamel al-Harami believes Opec's overproduction is close to two million bpd and the Gulf states exceeded their quotas by more than 500,000 bpd.

"Compliance is below 60 per cent ... and commercial inventories are at their highest level ever with stocks sufficient for 60 days but the price is too high and all parties are happy," Harami said. "It's a honeymoon time for everyone and that's why Gulf states won't push too hard for quota discipline now," he said.

A former member of Kuwait's Supreme Petroleum Council, Musa Maarafi, expects oil prices to remain at their current level throughout 2010. "At present, there are no apparent risks on oil prices. I think it will remain mostly at between US$70-80 a barrel in 2010 and this is comfortable for all," Maarafi said.

But he warned that the problem lies in the large stockpiles, the rising phenomenon of floating stocks and the return of speculators.

AFP