OPEC oil producers sealed a new output deal that agreed on a 30 million barrel daily output. This settles the argument over the current supply policy that favoured Saudi Arabia. The Gulf kingdom had earlier proposed to raise the output to stop the rising prices, but was rejected by Iran, Algeria, and Venezuela.
Theoretically, the agreement puts a cap on the output of 12 OPEC members for the first half of 2012.
Whether or not Saudi and its Gulf Arab allies are going to abide by the deal is not clear, as post-civil war Libya is gearing up towards full production. “If Libya increases it doesn’t necessarily mean Saudi will cut.? He also said “We don’t react to that, we react to market demand,”?Saudi Oil Minister Ali al-Naimi said.
According to analysts, without defined individual national quotas, it is likely the limit will be crossed. “The whole organisation has to be at 30 million so if someone goes up somebody else should come down. But it is like anything when you divide responsibility — it often ends up falling through the cracks,” said Webster of PFC.
Rising supply from Saudi Arabia and other Gulf countries such as Kuwait and the United Arab Emirates has helped to undermine oil prices and foster global growth by keeping fuel costs under control. London Brent lost $4.67 to $104.83 a barrel, while US crude fell $5.19 just around $94.95.
OPEC price hawks, however, majority of whom are pumping at full capacity, want to keep prices above $100. “We think the present level is appropriate for producers and consumers,” Algerian Oil Minister Youcef Yousfi said.?Iranian Oil Minister Rostam Qasemi also echoed the same tone. But, Gulf region wants to bring down the prices so that it does not hamper economic growth.
The world oil output is likely to improve with the improved Libyan oil output post-civil war. OPEC’s secretariat estimates around 30 million barrels a day and build stocks of 650,000 bpd from the group.
Next OPEC meeting is scheduled on 14 June, 2012.